Pakistan's Economy Better Equipped to Handle Middle East Conflict Oil Price Shock

Pakistan's economy is better equipped to handle the impact of the ongoing Middle East conflict on oil prices compared to the 2022 crisis, according to a Moody's analyst. The country has strengthened its macroeconomic stability over the past two years by containing inflation, stabilizing the exchange rate, and boosting foreign exchange reserves.

Grace Lim, an analyst with Moody's, said that Pakistan's improved buffer gives it better shock absorption capacity to meet the current Middle East conflict. This is a stark contrast to the 2022 oil crisis triggered by Russia's invasion of Ukraine, which saw a significant surge in global crude oil prices and energy costs.

The ongoing conflict has driven up global oil prices, with Brent crude futures rising 2.06 percent to $99 a barrel on Tuesday, while US West Texas Intermediate crude gained 3.2 percent to $94.41. Pakistan responded by increasing the price of petrol by Rs12.9 per liter and high-speed diesel by Rs3.72 per liter.