Pakistan has so far handled the Iran crisis better than many expected. On the economic side, there are still no visible fuel shortages despite the regional disruption. On the diplomatic side, Islamabad has managed to stay relevant, with Pakistan being seen as one of the countries trying to keep channels open between Iran, the US and the Arab states. For a country with weak external buffers, that is not some lofty foreign policy ideal. It is hard necessity.

Any prolonged conflict in the Gulf, especially one that threatens traffic through the Strait of Hormuz, has global implications. But for Pakistan, the damage would not be abstract or delayed. It would be immediate. This is an economy with thin forex reserves, limited fiscal space, high import dependence and little capacity to absorb another energy shock. In that context, Pakistan’s current posture deserves some credit. For once, the state appears to be reading the situation through the lens of its own survival rather than through the preferences of others.

That does not mean the country is operating from a position of strength. Far from it. Pakistan is walking a tightrope. Oil prices are already at dangerous levels, while the government does not have the reserves or the budgetary room to keep cushioning the blow for long. The petroleum-related fiscal burden has already crossed Rs100 billion and is still rising. That is not a number this economy can carry for very long without consequences.

There seems to be some hope in Islamabad that the conflict may not last long and that oil supply chains could normalize sooner rather than later. Maybe. But that looks optimistic. Even if the war does not widen dramatically, enough damage has already been inflicted on regional energy infrastructure and confidence to keep oil prices elevated for some time. Markets do not need a full blockade of the Strait of Hormuz to panic. They only need sustained uncertainty and a credible threat of disruption.

That alone is bad news for Pakistan. Energy efficiency is low. Import dependence is high. The balance of payments remains fragile. Once the higher oil bill starts feeding through more fully, pressure on the current account will build. Then comes pressure on the currency. After that, the familiar policy reflexes return: import compression, administrative controls, and more firefighting dressed up as management. It does not take much for a fragile external account to start unravelling.

The timing makes the problem worse. External payments are lined up. Financing options are not as easy as they looked a few months ago. The kind of regional uncertainty now in play can quickly shut doors that were previously assumed open. And even where financing remains available, it may come with heavier political expectations. That is exactly why taking sides in this conflict is not some casual diplomatic choice for Pakistan. It carries direct economic consequences.

The medium-term risks are larger still. If this conflict drags on and begins to alter the economic shape of the Gulf, Pakistan will not only face an oil shock. It could also face a remittance shock. Nearly half of Pakistan’s remittances come from GCC countries. If those economies slow down, cut spending, or see disruption

in sectors that employ Pakistani workers, remittance flows can come under pressure. If workers start returning home, the stress multiplies. Then it is not just the external account under pressure. Domestic demand, jobs and social stability come under pressure too.

And then there is the internal angle, which Pakistan can least afford to ignore. A prolonged conflict involving Iran carries obvious sectarian spillover risks. For countries sitting at a distance, this may be just another regional war. For Pakistan, it can become a domestic problem very quickly. That alone should settle the strategic question. Whatever some Gulf states may privately prefer in terms of weakening Iran, Pakistan cannot afford to see the matter through the same lens. Its exposure is different. Its vulnerabilities are deeper. Its room for error is much smaller.

That is why Islamabad’s balancing act makes sense, even if it looks messy. Pakistani mediation may not produce dramatic breakthroughs. It may even irritate some friendly capitals that would prefer clearer alignments. But from Pakistan’s point of view, trying to play a de-escalatory role is still the least damaging option. It is not about moral positioning. It is not about diplomatic grandeur. It is about reducing downside risk in a situation where every other option seems worse.

If the war continues, there will be more damage to energy infrastructure, more uncertainty in shipping, more volatility in commodity markets and a greater chance of a broader economic slowdown. For Pakistan, that would mean a toxic mix: a bigger oil bill, pressure on the rupee, possible remittance weakness, slower exports and rapid exhaustion of what little fiscal runway remains. That is not a scenario this economy is equipped to handle.

So yes, Pakistan is on a tightrope. Lean too far toward one side and it risks angering another. Stay too passive and events may overtake it anyway. But there is still logic in trying to keep channels open, support de-escalation and avoid being dragged into a conflict whose costs it cannot bear. Alongside Turkey and others, Pakistan has reason to push for a cooling of temperatures. Not because it has grand leverage, but because it has too much to lose.

This is not a story of strategic brilliance. It is a story of constraint. But sometimes constraint produces better judgement than ambition. For once, Pakistan seems to be doing the sensible thing for itself. In this region, and in this moment, that is saying quite a lot.