muzalah
The current situation in the global economy can be best described as a “perfect storm” of geopolitical crises, supply chain collapse, and unprecedented levels of inflation. From the streets of Karachi to the ports of Manila, the increase in energy prices has moved beyond mere market volatility to become a genuine humanitarian disaster. At the crux of the issue, however, is the strategic importance of the Strait of Hormuz, a waterway so narrow in width that it holds the key to the financial destiny of nations.
The situation in Pakistan, in particular, can be said to have reached a boiling point. As of late March 2026, the price of petrol in the country has officially crossed the psychological barrier to touch Rs. 321.17 per liter, with High-Speed Diesel (HSD) touching an unprecedented height of Rs. 335.86 per liter.The Petroleum Division of the government of Pakistan had recommended an increase in the price of petrol to touch the international market price, but the Federal Cabinet decided to absorb some of the price increase by imposing a massive subsidy to prevent the price from rising to Rs. 400. The damage to the local economy, however, is already evident, with transport costs doubling in Lahore and Karachi, and the price of essential commodities increasing by 30% in the last two weeks due to the use of diesel in their transport. For a country already in debt, this increase in energy prices is pushing the middle class towards poverty. Further East, the Philippines has taken the unprecedented step of declaring a State of National Energy Emergency. On March 24, 2026, President Ferdinand Marcos Jr. signed Executive Order No. 110, which grants the Government extraordinary powers in regulating the energy consumption and fuel distribution in the country. The Philippines is in a unique position because it imports nearly 98% of its petroleum products from the Middle East. The current maritime tensions have reduced the Philippines’ oil reserve to just 45 days. In order to alleviate the fuel shortage, the Government has taken the drastic measure of implementing the ‘Fuel Rationing Scheme.’ The country’s domestic airlines have been forced to ground 40% of their fleet in order to conserve jet fuel. The country’s major air hubs have been ordered to limit the hours of operations in order to ease the burden on the country’s power grid.
While the common consumer is suffering, the big powers are consolidating their positions. Russia, a leading global exporter of energy resources, has announced a total ban on the export of refined gasoline, also known as petrol, from April 1, 2026.This decision is taken to safeguard Russia’s internal market from the very inflation that Russia is contributing to in the global arena. Russia wants to keep the refined products within its boundaries so that it does not let inflation increase within its own country. But for the global arena, this means that there are no more millions of barrels of refined fuel available, and countries that do not have refineries are left to look for expensive alternatives. However, the underlying reason behind the worldwide panic is the rising tensions in the Strait of Hormuz. This small waterway connects the Persian Gulf and the Gulf of Oman and is the most significant oil transport channel in the world. It is estimated that 20% of the total petroleum liquids produced worldwide, which is roughly 21 million barrels daily, is transported through this narrow channel. It is also the only outlet for oil exports from Saudi Arabia, Iran, the UAE, Kuwait, and Iraq. The recent tensions in the area have sparked “market speculations” that the Strait of Hormuz could be totally shut down. The mere threat of this has already pushed the price of Brent Crude Oil up to $120 per barrel. As history has demonstrated during the 1970s oil crisis, when the flow of oil is threatened in the Middle East, the rest of the world is put in a state of stagflation a deadly combination of inflation and stagnating growth.
The effects of this ‘oil shock’ are being felt through three main avenues .A 50% hike in the cost of shipping a container or flying cargo means ‘imported inflation. Industries such as agriculture, which uses diesel for tractors, and chemicals, which uses petroleum as an input, are passing it on to the consumer. As businesses anticipate higher prices in the future, they are raising their own prices in the present, which makes inflation a self-fulfilling prophecy.
According to economists, what this crisis also points to is the pressing need for energy diversification. Countries that invested in alternative energy sources or alternative pipelines are riding out the storm better than those that rely on imported oil. For countries such as Pakistan and the Philippines, the current crisis is a stark reminder that energy security is, in fact, national security. Until the Strait of Hormuz stabilizes, the world economy teeters on a knife’s edge.
