The war in Iran is generating mounting economic and human repercussions across the region, with Pakistan among the countries most acutely affected. With more than 5.5 million Pakistanis working across the Gulf, whose earnings sustain millions of households back home, the conflict is increasingly translating into a domestic economic and social strain, as Islamabad grapples with the fallout of a crisis unfolding beyond its borders.
Remittances remain a critical pillar of Pakistan’s economy, accounting for between 3 and 5 percent of GDP, with around 55 percent originating from the Middle East. Analysts warn that a prolonged conflict, particularly if oil prices remain near or above $100 per barrel, could shave between 1.0 and 1.5 percent off Pakistan’s GDP, with deeper impacts likely if hostilities extend beyond six months. Currency experts are already anticipating a decline in inflows starting in March, as oil-dependent Gulf economies scale back activity amid supply disruptions. Over the past several days, oil flows have either halted or fallen sharply below normal levels, triggering ripple effects across labor markets and heightening the risk of job losses among foreign workers.
Historically, Pakistani and Bangladeshi workers have been among the first to be repatriated during economic downturns in the Gulf, a trend that could translate into losses estimated between $2 billion and $4 billion in remittances. Such a scenario would further strain Pakistan’s already fragile external balances.
Domestically, the pressure is already visible. The government recently increased petroleum prices by Rs55 per litre, with officials acknowledging that an initial proposal had considered a much steeper hike of Rs110 per litre. Further increases remain likely if the conflict persists. At the same time, Pakistan is projecting remittance inflows of $40 billion for the 2026 fiscal year, though the risk of sudden disruption is becoming increasingly pronounced.
The human impact is also becoming more apparent. Pakistan’s embassy in the United Arab Emirates has suspended in-person consular services “until further notice,” citing official guidance encouraging remote work and warning workers to avoid open areas. For millions of Pakistani laborers, including drivers, construction workers, and fishermen, this measure reflects growing instability in their working environment rather than a routine administrative step.
Recent incidents have further underscored these risks. Murid Zaman, a 48-year-old Pakistani driver who had spent decades working in the UAE, was killed in retaliatory Iranian strikes, while another worker died in a drone attack while fishing in Iranian waters. These cases highlight the extent to which foreign workers are exposed to the direct consequences of a conflict in which they have no stake.
On the diplomatic front, Islamabad faces an increasingly complex balancing act. While Pakistan has condemned Tehran’s retaliatory actions, its broader posture toward the conflict remains marked by ambiguity. The country’s reliance on Gulf partners for remittances, energy supplies, and security cooperation constrains its room for maneuver, particularly as the conflict threatens key strategic projects such as the China-Pakistan Economic Corridor and the port of Gwadar.
This ambiguity has become more visible in recent weeks. High-level visits by Prime Minister Shehbaz Sharif and Army Chief Asim Munir to Saudi Arabia, where they met Crown Prince Mohammed bin Salman and senior security officials, underscored the depth of bilateral ties. Official statements emphasized cooperation across multiple sectors, while Saudi accounts pointed to “coordinated efforts” in response to the escalating regional situation, an indication of the growing alignment between Islamabad and Riyadh, even as Pakistan seeks to avoid a definitive break with Tehran.
At the United Nations, this balancing strategy has been equally evident. During a recent Security Council session on the Iran war, Pakistan backed two separate resolutions, one led by Bahrain expressing solidarity with Gulf states, and another drafted by Russia calling for de-escalation and negotiations. Officials in Islamabad maintained that both positions were consistent, though the dual support reflects competing external pressures and internal constraints.
Domestic dynamics further complicate the situation. Religious groups with links to Shia networks, some historically associated with the Iranian Revolutionary Guard, represent a potential source of internal tension. Any perception of overt alignment with Gulf monarchies against Iran risks fueling sectarian sensitivities, forcing policymakers to tread carefully.
For now, Pakistani authorities maintain that returns from the Gulf remain limited and do not yet constitute a large-scale outflow. However, the structural vulnerabilities are clear. Remittances underpin household consumption, finance essential services such as education and healthcare, and support small businesses across the country. A sustained disruption could therefore have far-reaching economic and social consequences.
As the conflict continues, more than 4 million Pakistani workers remain effectively exposed to its risks, unable to leave or return easily, and increasingly vulnerable to both economic shocks and physical danger. Their situation underscores the broader stakes for Pakistan, where external geopolitical tensions are rapidly translating into domestic pressure.
Observers of the Iran war say Pakistan’s intensified efforts to mediate between the United States and Iran are driven by these pressures, as the conflict does not serve Islamabad’s interests. They warn that further escalation could force Pakistan to align with one side, a scenario that may carry significant domestic and international repercussions.
