The Iran conflict has evolved beyond missiles and rhetoric into a war of economic endurance. With maritime routes constrained and insurance premiums for oil shipments skyrocketing, global energy markets are facing an artificial scarcity that feels all too real. Unlike previous crises, this one is layered with uncertainty—no clear timeline, no definitive victor, and no guarantee that supply lines will normalize anytime soon.

Countries heavily dependent on imported oil—especially in Asia—have found themselves in a precarious position. Among them, India and Pakistan offer a striking study in contrasts: two neighbours, both energy importers, yet navigating the crisis with vastly different levels of preparedness and policy flexibility.

India, the world’s third-largest oil importer, has responded with a calibrated mix of fiscal discipline, strategic reserves, and policy agility. The latest move—cutting export duties on diesel and aviation turbine fuel (ATF) while keeping domestic duties unchanged—is emblematic of this balancing act.

By reducing export duties on diesel from ₹55.5 to ₹23 per litre and on ATF from ₹42 to ₹33, New Delhi aims to restore refining margins and maintain export competitiveness. At the same time, holding domestic duties steady ensures that government revenues remain intact, even as global oil prices spike.

This is not merely a technical adjustment—it is a signal. India is prioritizing domestic stability while keeping its refining sector viable in global markets. The decision reflects a deeper structural advantage: fiscal space.

A critical pillar of India’s resilience is its strategic petroleum reserves. With an estimated buffer of 60–70 days, India has the ability to release stocks into the market, cushioning supply shocks. This is complemented by foreign exchange reserves exceeding $600 billion, giving policymakers room to absorb external shocks without triggering currency instability.

In contrast to many economies that pass on global price volatility directly to consumers, India has taken a politically sensitive route—keeping retail fuel prices largely unchanged for nearly four years. This has come at a cost. Oil marketing companies have absorbed significant losses, but government interventions—such as excise duty cuts of around ₹10 per litre—have helped ease the burden.

The aviation industry, where fuel accounts for up to 40% of operating costs, has been particularly vulnerable. Recognizing this, the government capped monthly increases in ATF prices at 25% in April, a move designed to prevent runaway airfares and protect demand.

Airlines like IndiGo, which operate on thin margins, have been among the biggest beneficiaries of this policy. By stabilizing input costs, the government is indirectly supporting tourism, business travel, and broader economic activity.

If India’s response is defined by flexibility, Pakistan’s is shaped by constraint. The same global forces battering New Delhi have hit Islamabad harder, exposing deep structural vulnerabilities in its economy.

Pakistan’s petroleum minister, Ali Pervaiz Malik, offered a candid assessment: the country lacks strategic reserves and operates with a precariously thin buffer—just five to seven days of crude oil and about three weeks of refined products.

This limited запас forces Pakistan into a reactive posture, where policy decisions are dictated as much by external lenders as by domestic priorities.

Unlike India, Pakistan is bound by conditions set by the International Monetary Fund. These conditions restrict fiscal manoeuvrability, making it difficult to implement broad-based subsidies or tax cuts.

In a bid to manage rising fuel costs, Pakistan has taken a controversial approach: slashing the levy on diesel to zero while shifting the burden onto petrol. The government also introduced targeted subsidies for motorcyclists, a politically sensitive demographic.

Prime Minister Shehbaz Sharif defended the move, framing it as a necessary compromise to avoid breaching IMF commitments. Petrol prices were cut by ₹80 per litre, bringing them down to ₹378, but this relief is fragile—funded by reallocating fiscal burdens rather than expanding fiscal space.

Pakistan is also exploring non-price interventions, including energy conservation measures and even work-from-home policies to reduce fuel consumption. These are not signs of proactive governance but of compulsion—stopgap solutions in the face of limited options.

The broader economic impact is severe. Rising fuel costs are feeding into inflation, eroding purchasing power, and increasing the risk of social unrest. Unlike India, Pakistan lacks the financial buffers to absorb prolonged shocks, making it highly sensitive to global price movements.

The divergent responses of India and Pakistan underscore a fundamental truth about modern economic crises: resilience is built long before the crisis arrives.

India’s ability to cut export duties, cap fuel price increases, and maintain retail price stability is rooted in years of fiscal consolidation, reserve accumulation, and strategic planning. Pakistan’s struggles, on the other hand, reflect structural weaknesses—low reserves, high external debt, and dependence on international lenders.

At over $120 per barrel, crude oil is not just an energy issue—it is an inflation multiplier. Higher fuel costs translate into increased transportation expenses, pushing up the prices of goods and services across the board.

For India, the impact is moderated but not eliminated. Inflationary pressures persist, and the government must carefully balance consumer protection with fiscal sustainability.

For Pakistan, the situation is more acute. With fewer policy tools at its disposal, the country faces a sharper trade-off between inflation control and fiscal discipline.

The ongoing conflict involving Iran, the United States, and Israel has turned energy into a weapon and economies into collateral damage. The disruption of the Strait of Hormuz is not just a regional issue—it is a global crisis with far-reaching implications.

From Europe to Asia, governments are revisiting energy security strategies, accelerating investments in renewables, and reconsidering their dependence on volatile regions. Yet, in the short term, there are no easy solutions.

This is not a crisis that will be resolved by a single policy decision or diplomatic breakthrough. It is a test of endurance—economic, political, and social.

India, with its buffers and strategic foresight, appears better positioned to weather the storm, though not without cost. Pakistan, constrained by structural limitations and external dependencies, faces a far more uncertain path.

As the war drags on and oil markets remain volatile, the gap between the prepared and the vulnerable will only widen. In this unfolding saga, the true measure of strength is not military might but economic resilience—and on that front, the contrast could not be starker. (IPA Service)