As the Middle East conflict enters its second month, its economic fallout is spreading well beyond the region. With rising fuel costs, disrupted supply chains and heightened uncertainty feeding into inflationary pressures, energy-importing economies like Pakistan are beginning to feel the strain, even as businesses warn that the worst may still lie ahead.
For Pakistani manufacturers dependent on imported raw materials and inputs, the crisis has introduced a new risk to an already fragile domestic business environment. While the immediate impact remains manageable, industry leaders caution that the situation could deteriorate quickly if disruptions, particularly in the Strait of Hormuz — a vital global trade and energy corridor — persist.
“At the moment we have stocks, so supply disruptions are manageable for now,” said Syed Sheharyar Ali, chief executive officer of Treet Corporation, a conglomerate that specialises in razor blade production among other ventures. “We typically maintain around three months of imported raw material inventory, which has helped us absorb the initial shock.” Of course, not every producer, especially small and medium enterprises, can afford to maintain inventories for such a long period.
That buffer, however, is temporary. “It is only a matter of time before the impact of the war in the Gulf will start showing on businesses whose raw materials, like our steel for razors and razor blades or lithium-ion batteries, come through the Strait of Hormuz. This route is very important for our industry,” he said in an interview.
‘The closure of Hormuz is not only driving supply chain disruptions but also increasing unpredictability’
The pressure on domestic producers is already building through rising fuel prices, which are pushing up transportation and production costs across the economy. “The increase in fuel prices is a major blow, both in terms of direct and indirect impact,” Mr Ali noted. “It raises input costs by spiking transportation and freight rates, increases imported raw material prices, and impacts packaging and utility costs.”
After increasing fuel prices on March 7, the government has since held them steady to avoid political backlash, absorbing the cost through the budget. It has already paid Rs79 billion in subsidies, and the decision to keep prices unchanged this week will add nearly Rs56bn more to that burden.
In an import-dependent economy like Pakistan’s, such shocks tend to cascade quickly. “We rely on imports for about half of our materials for razors and razor blades, and nearly entirely for our energy storage business,” he added.
Beyond firm-level concerns, Mr Ali pointed to broader macroeconomic risks. “Pakistan has only recently emerged from a period of exceptionally high interest rates, but the current crisis threatens to reverse that progress. If the problem is not resolved quickly, we might see the cost of borrowing rising again by two–four percentage points in the coming months.”
‘The perception of cheap Pakistani labour as a competitive advantage is increasingly a fallacy’
“That will raise our inventory costs and bring pressure on our inventory cycles. If this happens, we will have to make some very tough, structured decisions,” he argued. More fundamentally, the disruption of key trade routes is creating deep uncertainty. “The closure of Hormuz is not only driving supply chain disruptions but also increasing unpredictability. Nothing positive comes out of this situation.”
That uncertainty is already forcing companies to reassess long-term plans. “We had a five-year investment and expansion plan for our razor and razor blade business laid out. We will have to revise it and restructure our costs and goals,” he said, sharing that if the crisis continues beyond the next 30 to 60 days, “we are going to suffer a big financial impact on our costs”.
Bankers, too, are growing increasingly jittery. “We believe that businesses will come under financial stress if the war continues for another month or more, potentially creating cash flow problems and forcing some to delay debt repayments,” a banker said.
Yet, even before the current crisis, Pakistan’s manufacturing sector was grappling with deep, serious challenges. According to Mr Ali, the most significant of these is policy inconsistency. “The primary fear among investors is the lack of long-term government vision,” he said.
While he acknowledged that the current administration appears to be moving in a positive direction, he stressed that consistency remains the key issue. “Policy stability for a minimum of five to six years is critical.”
Taxation is another major concern. Rather than broadening the tax base, he stressed, the burden continues to fall disproportionately on compliant businesses. Liquidity constraints further compound the problem. “Sales tax refunds are another issue. These trap liquidity for months and even years,” he noted.
Energy costs, meanwhile, have eroded whatever competitive advantage Pakistan once enjoyed in labour. “The perception of cheap Pakistani labour as a competitive advantage is increasingly a fallacy,” he said. “Automation has overtaken manual labour in efficiency, and cripplingly high electricity costs negate even that.”
As a result, Pakistani products struggle to compete globally, particularly against regional rivals. “Countries like China and India heavily subsidise their industries through tax holidays and other incentives,” he explained. “Their production costs are at a level we simply cannot match.”
Despite these challenges, Treet Corporation has managed to maintain a significant export footprint. The company produces around 2.1bn to 2.2bn blades annually, exporting to 30 to 35 countries. “Our blade is considered one of the best among the top three or four in the world,” Mr Ali said.
However, export volumes have declined from around 50pc of production at their peak to roughly 20–30pc today, reflecting intensifying competition and shifting global demand.
He urges a shift in government priorities from chasing new investments to protecting existing businesses. Firms are shutting down, and policy should focus on sustaining them.
Key reforms, he says, are well known: long-term policy stability, affordable utility costs, lower taxes and faster tax refunds to improve competitiveness. He also calls for more inclusive policymaking, proposing a broad-based panel of technocrats and business leaders to avoid siloed decisions that benefit one sector at the expense of others.
Looking ahead, the company’s strategy is increasingly focused on international markets and new product lines. Expansion efforts are increasingly geared towards exports and value addition. “Currently, blades are exported for assembly abroad and re-imported as finished products. The plan is to bring that assembly in-house by mid-2027,” he said.
At the same time, the company is positioning itself to capitalise on a major shift in the energy storage market. “The future is clearly towards off-grid solutions and lithium-ion technology,” Mr Ali said. “In the last three years, lithium-ion prices have fallen significantly. Now they are competing with lead-acid batteries.”
That said, Mr Ali remains cautious about the broader outlook. “You can’t clearly see where the country is headed, and people are stressed,” he said. Modest gains in the stock market or headline figures, he argued, mask a harsher reality of shrinking purchasing power and cautious consumers as inflation erodes spending. “Across all income levels, people are cutting back.”
As the Gulf crisis deepens, these pressures are likely to intensify — testing both business resilience and the coherence of economic policy.
Published in Dawn, The Business and Finance Weekly, March 30th, 2026