KARACHI – (SHouthi Saudi attacks Pakistan is now a big worry for investors and economists this week. They warn that higher global oil prices could add up to $1.2 billion to the country’s quarterly import bill.
The Iran-backed Houthis have stepped up strikes on Saudi civilian and energy sites. On Saturday, an attack on King Khalid International Airport in Riyadh killed 13 people and injured more than 300. A later strike hit an administrative building at Saudi Aramco’s headquarters in Dhahran.
The trouble comes during the wider US-Iran war, which began in February. The war has disturbed oil shipments through the Strait of Hormuz. Pakistan buys most of its fuel from abroad, so higher prices quickly put pressure on its finances.
Oil Prices Hit the Import Bill First
Muhammad Waqas Ghani, head of research at JS Global Capital Pakistan Ltd in Karachi, believes oil is the most urgent threat. He estimates that a rise of $20 to $30 per barrel for one quarter adds $700 million to $1.2 billion to the import bill.
Brent crude settled at $106.06 a barrel on Wednesday, October 14. That is about 46 percent higher than the $72.48 seen before the war. US West Texas Intermediate closed at $95.09, up from $67.02.
Prices eased a little on Thursday, but Brent stayed above $100.
Last year, Pakistan imported about $17 billion worth of petroleum products, according to the Pakistan Bureau of Statistics. In July and August alone, petroleum imports rose more than 8 percent to $2.75 billion.
Household Budgets May Feel the Squeeze
Costlier fuel can raise transport and production costs. That usually pushes up prices in shops and puts pressure on family budgets.
Muhammad Ahmed, chief executive of Merix Global in Singapore, says household savings may fall. In his view, oil above $100 a barrel creates inflation pressure for the average Pakistani family.
Stock Market Stays Steady, but Investors Are Nervous
Surprisingly, the KSE-100 index has not fallen broadly. It gained about 0.2 percent between October 5 and Thursday, October 15, and closed at 166,186.17 points. Average daily trading volume also rose to 462 million shares this week from 420 million last week.
Still, some people are cutting their risk. Abdul Rauf, 69, withdrew 75 percent of his Rs10 million ($35,700) stock portfolio. He kept the rest so he can buy shares if prices drop.
Mohammad Shoaib, chief executive of Lucky Investments Limited, said the attacks are pushing market sentiment lower.
The index is down about 2,645 points, or 1.6 percent, since the last session before the US and Israel struck Iran in February. However, that fall cannot be blamed only on the latest attacks.
Remittances Are Also Under Watch
Saudi Arabia is the largest source of money sent home by Pakistani workers abroad. From July to September, Pakistan received $10.9 billion in remittances, up 14 percent from last year. Saudi Arabia alone sent about $2.69 billion.
Pakistan International Airlines suspended flights to Riyadh last week. Ghani says remittances will suffer only if the disruption lasts long enough to hurt workers’ jobs, income or travel.
Ahmed points out that overseas Pakistanis often send more money home during hard times. That support can help families protect their savings.
[…] strike on Riyadh’s international airport killed at least 12 people and injured more than 300. The Houthi movement in Yemen claimed responsibility. It was the deadliest attack in Saudi Arabia in over ten […]