Oil, War, and Diplomacy

Shanza Kabeer

Islamabad: In 2026, the Strait of Hormuz once again became the center of global anxiety. This narrow maritime passage, only about 33 kilometers wide at its narrowest point, emerged as perhaps the most dangerous geopolitical flashpoint in the world.

Nearly 20 percent of globally consumed oil and almost one-third of seaborne oil trade passes through this corridor every day. Around 17 to 20 million barrels of oil move through Hormuz daily, connecting Gulf energy producers to the industrial economies of Asia, Europe, and North America.

When tensions between Iran and the United States escalated earlier this year through missile exchanges and naval confrontations, the global economy immediately felt the shock.

Brent crude prices surged toward the $100-per-barrel mark, while insurance costs for Gulf-bound tankers reportedly jumped by more than 60 percent within days. Analysts warned that even a one-month disruption in Hormuz could cost the world economy hundreds of billions of dollars in lost trade and productivity.

This was never just a regional conflict. China imports nearly 45 percent of its crude oil from the Middle East, while Japan and South Korea remain deeply dependent on Gulf energy routes.

India’s economy also relies heavily on oil transported through the Arabian Sea and the Hormuz-linked supply chain. Any prolonged confrontation between Tehran and Washington carried the potential to trigger a worldwide economic crisis.

For developing countries already struggling with inflation, debt, and post-pandemic recovery, the danger was even greater. Economists warned that oil prices crossing $120 per barrel could push several vulnerable economies toward recession. Pakistan, which imports a large share of its energy requirements, was among the countries most exposed to the fallout.

Despite the enormous imbalance in military power, with the United States spending more than $900 billion annually on defense compared to Iran’s estimated defense budget of less than $30 billion, Tehran understood that geography could compensate for conventional weakness. Iran’s strategy was not to defeat the United States militarily, but to raise the economic cost of confrontation to an unsustainable level for the international system.

Using anti-ship missiles, drones, naval patrols, and pressure through regional proxy networks, Iran demonstrated how smaller states can weaponize geography in an age of globalization. The Strait of Hormuz itself became Iran’s greatest strategic asset.

At the same time, Washington found itself trapped between two competing objectives: maintaining military pressure on Iran while also ensuring stability in global energy markets. Every military response risked triggering further escalation.

Although the United States increased its naval deployments in the Gulf, including aircraft carriers, destroyers, and surveillance operations, military superiority alone could not guarantee geopolitical control.

This crisis highlighted an important reality of modern conflict: wars today are no longer decided solely by military power. Economic disruption, cyber capabilities, maritime chokepoints, and psychological deterrence now shape global confrontations just as much as conventional weapons.

Amid this volatile environment, Pakistan adopted a notably different approach from many regional actors. While some Gulf states openly aligned themselves with Washington and others expressed support for Tehran, Islamabad pursued a carefully balanced policy of neutrality and engagement.

Pakistan’s unique diplomatic position gave it unusual leverage. It maintained working relations with Iran, security cooperation with the United States, strategic economic ties with China, and longstanding partnerships with Saudi Arabia and other Gulf monarchies.

Few countries in the region possessed communication channels with all sides simultaneously.

Pakistan’s motivations were driven less by ideology and more by strategic necessity. A prolonged Iran-US conflict would have severely damaged Pakistan’s fragile economy.

Rising oil prices directly increase pressure on Pakistan’s foreign exchange reserves, inflation, transportation costs, and electricity prices. Domestic economic stability was already under strain.

Beyond economics, Islamabad also had serious security concerns. A larger regional war risked refugee flows across the Iran–Pakistan border and could inflame sectarian tensions inside the region.

Most importantly, instability threatened the long-term viability of the China-Pakistan Economic Corridor (CPEC), a project worth more than $60 billion and central to Pakistan’s future economic ambitions.

What stood out during the crisis was Pakistan’s evolving diplomatic posture. For decades, Pakistan was often viewed internationally through the lens of terrorism, military dependency, and regional instability.

The Hormuz crisis offered Islamabad an opportunity to project itself differently, as a stabilizing middle power capable of crisis management and strategic balancing.

Reports suggesting Pakistani involvement in backchannel diplomacy and de-escalation efforts reflected this broader shift in foreign policy thinking. Rather than joining rigid geopolitical blocs, Pakistan attempted to position itself as a mediator capable of maintaining communication where others could not.

This approach also aligned closely with broader Chinese interests. Beijing remained cautious throughout the confrontation, but China’s economic future depends heavily on uninterrupted Gulf energy supplies. Any prolonged disruption in Hormuz would have threatened industrial production, trade routes, and energy security across Asia.

By supporting de-escalation, Pakistan indirectly strengthened regional economic connectivity and increased its strategic relevance within China’s broader regional calculations.

Crucially, Islamabad appeared to recognize what many others understood privately: neither Iran nor the United States could afford a full-scale war.

Iran’s economy was already under immense pressure from sanctions and financial isolation, while the United States faced growing domestic fatigue over overseas military engagements after decades of conflict in the Middle East. Washington also understood that a major war in the Gulf could derail an already fragile global economic recovery.

Pakistan’s diplomacy, therefore, was rooted not in idealism, but in strategic realism.

Although the eventual temporary ceasefire did not resolve the deeper disputes between Tehran and Washington, including Iran’s nuclear program, sanctions, regional influence, Israeli security concerns, and the US military presence in the Gulf, even limited de-escalation carried enormous significance.

Analysts warned that a prolonged conflict could have pushed oil prices beyond $150 per barrel, creating severe economic consequences for both developed and developing nations. The International Monetary Fund had already cautioned that sustained energy shocks could significantly weaken global economic growth in the coming years.

The Hormuz crisis ultimately revealed something larger about the changing nature of global politics. Military power alone is no longer enough to shape outcomes. Diplomacy, economic interdependence, connectivity, and crisis management are increasingly defining international influence.

Pakistan appeared to understand this changing reality. By maintaining relationships with competing powers rather than tying itself exclusively to one geopolitical camp, Islamabad increased its strategic value during one of the most dangerous international crises of the decade.

The most important lesson from the 2026 Hormuz confrontation may be that middle powers are becoming increasingly important in managing an increasingly fractured world order. Pakistan did not possess the military fleets of the United States or Iran’s missile capabilities.

What it did possess, however, was the ability to keep communication alive when confrontation threatened to spiral out of control.

In a multipolar world shaped by economic fragility, strategic mistrust, and interconnected crises, that kind of diplomacy may prove more valuable than military power itself.

Shanza Kabeer is an MPhil scholar in Defence and Strategic Studies at Quaid-i-Azam University.

The article is the writer’s opinion, it may or may not adhere to the organization’s editorial policy.

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