Both Pakistan and India are planning to hike fuel prices because the Strait of Hormuz conflict is blocking oil and gas shipments from the Gulf. This is raising energy costs around the world and hurting the economies of South Asia, which depend on imports.
What is the Hormuz crisis?
The Strait of Hormuz is a narrow sea passage that connects the Persian Gulf with the Gulf of Oman, and where about one-fifth of the world’s daily oil and significant LNG volumes typically transit. After Iranian attacks and threats against tankers during a wider US‑Iran–Israel confrontation starting in late February 2026, tanker traffic collapsed with vessels anchoring outside the strait and flows “largely halted.” This disruption has sent Brent crude over 90 dollars a barrel and created fears prices might climb to 100 if the blockages continue. And because Asia gets so much of its Gulf energy through Hormuz, the shock is being felt particularly hard in regional economies, currencies and inflation.
Pakistan’s fuel price hikes and emergency steps
Pakistan — reliant on imported oil and long‑term diesel supplies from its partners in Kuwait that typically pass through Hormuz — has already authorized fuel price increases for March as it prepares further emergency measures. Effective 1 March 2026, petrol (motor spirit) was increased from about 258.17 to 266.17 Pakistani rupees per litre, while high‑speed diesel was increased from 275.70 to 280.86 rupees on the Oil and Gas Regulatory Authority recommendations Already, the cost gap for diesel rose by about 45–50 rupees per litre in the first week of closing Hormuz and petrol by about 25–26 rupees as officials say that if global prices remain firm, more hikes are not distant.
The government has circulated a summary for its Economic Coordination Committee to consider weekly petroleum price adjustments, compensating oil companies and even work-from-home where possible to save fuel and “keep markets liquid”. Pakistan now has just over 500,000 tonnes of petrol and diesel stocks — some coverage of 26 days and 25 days respectively — leading to concerns about potential shortages if alternative routes are not quickly arranged. Islamabad has also sought to reroute oil from Saudi Arabia through the Red Sea port of Yanbu, while state-run Pakistan State Oil has tendered for petrol and diesel outside the Hormuz route as a precaution.
Insurance and freight costs for shipments have skyrocketed, with insurance increasing from about 30,000 dollars to an estimated 400.000 dollars per ship and freight rates going from less than 900,000 dollars to over 4 million dollars — costs that domestic refiners and oil marketing companies cannot bear without transferring them on consumers. Regulators have also limited supplies to fuel dealers based on sales over eight-month periods in an effort to avoid hoarding and sudden local shortages as prices shift.
India’s exposure and fuel pricing stance
India is one of the world’s biggest energy importers and derives a large portion of its crude oil and LNG via the Strait of Hormuz — approximately 14 million tonnes of LNG annually, for instance. The conflict has raised the risk to shipping routes and increased insurance costs on Gulf waterway, and Indian policymakers are mindful that turbulence in gulf remittances and elevated energy import bills could weigh upon growth and the rupee. About 20 percent of the global oil and gas shipments that India depends on are caught up in the current disruption, analysts say, exacerbating volatility in domestic fuel, power and fertilizer costs.
So far, Indian officials have publicly emphasized that domestic retail fuel prices are “unlikely” to come under immediate sharp hikes, citing instead the diversification of crude sources, use of strategic reserves and exploration of alternative shipping corridors that avoid Hormuz. But as world benchmarks soar and Gulf producers say they may need to stop more exports or declare force majeure if fighting drags on, pressure is mounting on New Delhi’s pricing mechanism and the margins of state‑owned oil companies. Sustained higher global crude would either gradually pass through into petrol and diesel or require steeper subsidies, tax changes to protect consumers: increasing fiscal risks.
Regional and global economic impact
The Hormuz blockade has reverberated through energy markets worldwide, with tanker traffic plummeting and major shipping companies halting business in the region. For South Asia, where Pakistan and India have become heavily dependent on imported fuels for transport, industry and power, higher pump prices are at risk of bleeding straight into inflation and further stunting already frail growth. Pakistan, meanwhile, already contending with balance‑of‑payments stress and IMF-baked austerity will now be hit with pricier transport costs, pricier electricity generation and renewed political pressure on living costs. India, perhaps more diversified and on a better fiscal wake than before, would be faced with higher logistics and manufacturing prices which would make its disinflation efforts, as well as budget calculations, that much harder if crude heads towards triple‑digit territory.
Global commodity traders are cautioning that if the crisis spreads or drags on, Asian buyers such as India and Pakistan will be compelled to pay up for Atlantic Basin crude and gas, tightening supplies and increasing prices around the world. Gulf producers are looking for alternative routes — including outlets in Saudi Arabia on the Red Sea, for instance — to keep at least some flows continuing, but capacity constraints mean those detours cannot substitute completely for Hormuz in the near term. The result is a less resilient global energy system, with South Asian consumers at the sharp end of price spikes and rationing threats as Pakistan — and possibly India — raise fuel prices to match the new reality.