Pakistan's inflation rate climbed sharply to 11.7% in May compared to the previous year, marking the highest level the country has seen in two years. This increase reflects the dramatic rise in international oil and gas prices driven by ongoing conflict in the Middle East, which has severely disrupted the country’s energy imports.
The Pakistan Bureau of Statistics reported that core inflation, excluding food and energy, also rose significantly, hitting 9% year-over-year growth for urban areas. The energy price shock has not only pushed up fuel costs but has contributed to persistent power shortages and fuel rationing across the country.
The most significant price jumps occurred in key energy products. Jet fuel prices nearly doubled, increasing by 94%, diesel surged by 70%, and motor gasoline climbed 62% compared to the same month last year. Besides energy, basic food commodities like sorghum and wheat also experienced notable price hikes.
Pakistan’s heavy dependence on energy imports from the Middle East, especially liquefied natural gas (LNG) from Qatar, has exposed it to the broader regional supply crisis. The shutdown of Qatari LNG production due to the Iran war and the closure of the Strait of Hormuz have disrupted typical supply routes.
Amid these challenges, Pakistan has been facilitating U.S.-Iran negotiations and has worked to reroute Qatari LNG shipments through a bilateral agreement with Iran. This arrangement has allowed some LNG shipments to reach Pakistan recently, easing—but not resolving—the escalating energy crisis characterized by frequent blackouts and fuel shortages.