The Middle East crisis has disrupted maritime trade routes and exposed a structural reality of the global economy. Currently, trade flows through several vulnerable corridors shaped by geography and geopolitics. Uncertainty is at its peak with the realisation that key shipping routes – the Strait of Hormuz, Bab-el-Mandeb, and the Suez Canal – have become strategic bottlenecks. Any instability in these passages can destabilise the majority of world economies, some less so and others more severely.
The Strait of Hormuz is the most consequential trade corridor for energy and industrial commodities. Approximately 20% of global oil supply passes through the strait, and the recent crisis has reverberated across countries through multiple issues, including delayed shipments, which dropped by 97% in March 2026; higher freight costs, with war risk insurance premiums reported to have doubled to $50,000 per voyage; and increased oil prices and inflationary pressure.
For Pakistan, this situation is an economic condition and a reality. It is expected that inflation may rise in Pakistan, from 7% to as high as 15-17%. The situation has disrupted shipping patterns across the Red Sea region, forcing vessels to take longer alternative routes. Pakistan is an importing country and a significant share of its energy imports originates from Saudi Arabia, Qatar and the UAE. Therefore, the country is exposed to multiple threats as the Middle East disruptions are translating into higher domestic prices in the country, supply chain interruptions, fuel consumption, rising freight costs, insurance premiums, and pressure on external balances (fiscal balance and trade deficit). Pakistan’s import basket shows the economy’s reliance on energy and industrial inputs[1]. Any disruptions in the Middle East trade route trigger domestic macroeconomic constraints. Therefore, the geopolitical instability is directly transmitted into household welfare in Pakistan through inflated prices of fuel, food and industrial input.
A good, timely strategy by Pakistan can offer a short and efficient route to the Arabian Sea, thereby generating transit revenues, expanding logistics services, and attracting industrial investment along corridor routes.
The shift is not only in the shipping routes, but it can be seen as a reconfiguration of connectivity. There is an emergence of competing trade corridors, especially the China-Pakistan Economic Corridor (CPEC), India-Middle East-Europe Economic Corridor (IMEC) and International North -North Transport Corridor (INSTC). These corridors will facilitate smooth trade flows, reduce dependency on the risky routes and are expected to influence global logistics networks.
Pakistan has some advantages due to its location, and it must convert them into a logistical capability. As the country is located near the Strait of Hormuz and connected to China, Central Asia, and the Arabian Sea, it must seize the opportunity to function as a transit bridge among oil-producing Gulf countries, East Asian manufacturing hubs, and landlocked Central Asian states. Similarly, the ports of Karachi and Gwadar can absorb the major trade flows if utilised strategically. In fact, Pakistan’s high trade costs act as an implicit tax on its economic potential, and the logistics system that supports trade structure has revealed weaknesses. While Karachi and Port Qasim handle the bulk of Pakistan’s maritime trade. But Gwadar is still underutilised and exposed to institutional constraints. In the month of March, Karachi port absorbed the sharp surge of shipping activity reflecting growing operational significance during the regional crisis. Nearly 75% of redirected cargo shipments were handled at Karachi port. The surge was more in container traffic, with port handling around 11,000 transhipment containers and 133 vessel calls.
A good, timely strategy by Pakistan can offer a short and efficient route to the Arabian Sea, thereby generating transit revenues, expanding logistics services, and attracting industrial investment along corridor routes. A clear policy response is required in the short term, and Pakistan must go for some more investments in already built infrastructure, linking port – sea routes, port-road infrastructure, and port-rail infrastructure. In the second, medium-term phase, trade facilitation can be improved as per requirements in customs reforms, port efficiency, border management, and handling shipping lines. Some of the System is already working through the Pakistan Single window and WeBoc, but still following international standards, laws and agreements can strengthen the structure. Virtuous political diplomacy will engage China, Gulf countries, Iran and Central Asian states. Even engaging Pacific countries is another good option to ensure connections translate into mutual benefits.
In a nutshell, the current global trade is now shifting from production efficiency to logistics efficiency. Diversification of trade corridors, overcoming energy dependence, and creating well-established logistic networks will give Pakistan some real opportunities. The Middle East crisis is not only alarming, but it is a global reminder that the structure of trade is politically framed. Pakistan must see a dual reality of increased vulnerability in the short run and a significant opportunity in the long run. The future will depend on the right choice of policy and strategy. In a world where corridors determine competitiveness, geography is not destiny, but “strategy is.”
The writer is a Senior Research Economist at the Pakistan Institute of Development Economics (PIDE) and can be reached at [email protected].