Pakistan is once again grappling with rising inflation as escalating tensions in the Middle East, particularly the Israel-US conflict with Iran, begin to ripple through its economy, a report has said.
The surge in global energy prices has pushed the country's inflation back into double-digit territory, with the Sensitive Price Indicator (SPI) climbing 12.15 per cent year-on-year (YoY), marking a 74-week high, The Express Tribune reported.
According to analysts at Topline Securities, the latest spike reflects the severity of the ongoing price shock. This comes after a period of relative stability in late 2025, when SPI inflation had dropped to as low as 2.4 per cent in early January 2026, largely due to a favourable base effect. However, the situation has deteriorated rapidly, with inflation jumping sharply from around 4–5 per cent levels recorded in February this year.
The primary driver behind this sudden rise is the volatility in global energy markets triggered by geopolitical tensions in the Middle East. As international oil prices surged amid fears of supply disruptions, the impact quickly filtered into Pakistan's domestic economy, where fuel costs significantly influence overall inflation.
Fuel prices have seen a steep increase over the past year, with diesel soaring by 101.02 per cent, petrol rising 48.70 per cent and LPG climbing 65.86 per cent on a YoY basis. This sharp rise has increased transportation and logistics costs, setting off a chain reaction that has driven up the prices of essential goods.
The energy shock has also intensified food inflation, placing additional strain on household budgets. Prices of key staples have risen significantly, with onions becoming costlier by 37.80 per cent, wheat flour by 30.10 per cent and tomatoes by 23.07 per cent compared to last year. Protein sources have not been spared either, as mutton and beef prices have increased by nearly 15 per cent and 14 per cent, respectively.
On a weekly basis, the pressure appears even more pronounced. Diesel prices jumped 54.71 per cent while petrol rose 17.86 per cent, leading to immediate increases in transportation costs. This has translated into sharp rises in the prices of perishable food items within just a week, including tomatoes, potatoes and onions.
Pakistan hikes electricity tariff in double whammy after fuel price rise
Pakistan's National Electric Power Regulatory Authority (NEPRA) has delivered another shock to consumers by increasing electricity tariffs by Rs 1.42 per unit under the monthly fuel cost adjustment, citing a variation in fuel charges for February 2026.
The hike will be reflected in April bills and is expected to impose an additional burden of around Rs 10.57 billion on consumers, according to an editorial in The News International.
While the government has introduced austerity measures in the wake of the Middle East conflict, including efforts to conserve fuel, rising costs continue to hit consumers both at the pump and at home. The report notes that there appears to be little relief from price and tariff hikes for the public.
The industrial sector is also under strain. A representative of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said the sector has already borne an aggregate burden of Rs 564.7 billion over the past three years, warning that further increases could hurt sustainability and industrial viability.
Pakistan's power sector issues, however, predate the current crisis. In FY2024–25, the power distribution sector recorded losses of Rs 397 billion due to transmission and distribution inefficiencies and weak bill recoveries. The report also pointed to structural issues such as fixed payments to power producers and low utilisation of plants, which continue to weigh on the sector.
With global energy markets remaining uncertain, Pakistanis may continue to face rising costs for both fuel and electricity in the near term.
(With inputs from IANS)
