Hormuz Anxiety: What Strait Security Means for Pakistan's Energy Bill

A senior shipping industry executive told reporters this week that the sector needs binding assurances that the Strait of Hormuz will remain open before it can normalise insurance rates and routing decisions. The statement, made at an industry conference on the sidelines of G7 week, was blunt in a way that diplomatic communiqués rarely are.

For Pakistan’s economic planners, it is the kind of sentence that concentrates the mind.

The numbers behind the anxiety

Approximately 20 to 21 million barrels of oil pass through the Strait of Hormuz daily — around 20 percent of global petroleum liquids. Pakistan imports roughly 120,000 to 150,000 barrels per day, the majority sourced from Gulf producers. When freight rates spike or insurance premiums rise because of Hormuz risk, the cost lands directly on Pakistan’s import bill and, within weeks, on its foreign exchange reserves.

The 2019 tanker attacks, which were attributed to Iran by the US and its Gulf allies, offered a preview of what sustained Hormuz instability looks like in practice: war risk insurance premiums tripled, some insurers suspended Gulf coverage entirely, and freight rates spiked. Pakistan was not the hardest hit — it does not have the spot-market exposure of some Asian importers — but the pass-through to domestic fuel prices was visible.

Remittances: the other Hormuz exposure

The strait is not just an oil route. The Gulf states that sit around it — Saudi Arabia, the UAE, Qatar, Kuwait — collectively host over four million Pakistani workers. Their remittances, which the State Bank of Pakistan estimates at well above $15 billion annually, are the single most important buffer in Pakistan’s balance of payments.

Any conflict or sustained instability in the Gulf does not only raise oil costs. It puts those remittance flows at risk. Workers return, funds dry up, and the balance-of-payments position that Pakistan has spent three years stabilising deteriorates rapidly.

What the Iran deal changes — and what it doesn’t

The current US–Iran framework, if it holds, reduces the near-term probability of a deliberate Hormuz closure. That is unambiguously positive for Pakistan. But the structural vulnerability remains: Pakistan has no meaningful ability to influence Hormuz security, no naval presence in the Gulf, and no bilateral energy infrastructure that bypasses the strait.

The Iran–Pakistan gas pipeline, long discussed and never completed, would theoretically reduce this exposure. It remains stalled — partly due to US sanctions risk, partly due to financing problems, and partly due to the political complications of deepening energy dependence on Tehran at a moment when the Gulf states are Pakistan’s primary financial backers.

The medium-term hedge

Pakistan’s energy planners have discussed LNG diversification, pipeline alternatives from Central Asia, and accelerated domestic solar capacity as ways to reduce Gulf oil dependence. Progress on all three has been slower than the rhetoric suggests. Until it materialises, what happens in the Strait of Hormuz is, for Pakistan, a domestic economic variable disguised as a foreign policy question.