KARACHI: Escalating Houthi attacks on Saudi Arabia are raising concerns among Pakistani investors and economists, who warned this week that sustained increases in global oil prices could add up to $1.2 billion to the country’s quarterly import bill.

The Iran-backed Houthis have intensified attacks on Saudi civilian and energy infrastructure, including Riyadh’s King Khalid International Airport, where a strike on Saturday killed 13 people and injured more than 300. A subsequent attack targeted an administrative building at Saudi Aramco’s headquarters in Dhahran.

The escalation comes amid the wider US–Iran war, which began in February and has disrupted energy shipments through the Strait of Hormuz. Pakistan, which relies heavily on imported petroleum, faces renewed pressure on its external finances and inflation if oil prices remain elevated.

“I believe oil prices remain the more immediate threat to Pakistan’s import bill,” Muhammad Waqas Ghani, head of research at Karachi-based brokerage JS Global Capital Pakistan Ltd., told Arab News.

“$20-30 per barrel increase in international oil prices for a quarter adds $700 million to $1.2 billion to Pakistan’s import bill,” he estimated.

Brent crude settled at $106.06 per barrel on Wednesday, October 14, up about 46 percent from $72.48 before the war. US West Texas Intermediate settled at $95.09, compared with $67.02 before the conflict. Oil prices eased on Thursday but remained above $100 a barrel for Brent.

Pakistan imported approximately $17 billion worth of petroleum products last year, according to the Pakistan Bureau of Statistics. Petroleum imports rose more than 8 percent year-on-year to $2.75 billion in July and August, the first two months of the current fiscal year.

Higher energy costs could also feed into domestic inflation, increasing transport and production expenses and squeezing household budgets.

Muhammad Ahmed, chief executive of Singapore-based investment adviser Merix Global, said sustained oil prices above $100 a barrel could reduce household savings by pushing up living costs.

“The individual savings of an average Pakistani household should reduce in the future, given that we already have entered a phase where the global oil prices are above $100 per barrel, which would create an inflationary pressure,” he said.

INVESTOR ANXIETY

Although the regional conflict has unsettled some investors, Pakistan’s stock market has shown no broad decline following the latest Houthi attacks.

The benchmark KSE-100 index gained approximately 0.2 percent between October 5, when the Houthis claimed attacks on Saudi facilities, and Thursday, October 15, closing at 166,186.17 points.

Average daily trading volume rose to 462 million shares this week from 420 million the previous week, according to JS Global Capital data.

However, individual investors say the uncertainty has prompted them to reduce their exposure.

Abdul Rauf, 69, said he withdrew 75 percent of his Rs10 million ($35,700) stock portfolio as the security situation deteriorated. He primarily invests in oil, refinery and fertilizer companies.

“Because of what is happening nowadays between Saudi Arabia and Houthis, who attacked their (oil) installations yesterday, people got scared,” Rauf told Arab News on Wednesday at the Pakistan Stock Exchange in Karachi.

“Since the situation started to deteriorate, we have withdrawn about 75 percent of the investment.”

Rauf said he had retained the remaining quarter of his portfolio to buy shares if prices declined.

“The attacks on Saudi Arabia are driving the sentiments negative,” Mohammad Shoaib, chief executive of Lucky Investments Limited, said.

The KSE-100 has lost approximately 2,645 points, or 1.6 percent, since the last trading session before the US and Israel launched strikes on Iran in February, according to exchange data. That longer-term movement, however, cannot be attributed solely to the latest Houthi attacks.

REMITTANCE RISKS

Economists are also watching for potential disruption to remittances from Saudi Arabia, Pakistan’s largest source of money sent home by overseas workers.

Pakistan received $10.9 billion in workers’ remittances during July–September, up 14 percent from a year earlier, according to the State Bank of Pakistan. Saudi Arabia accounted for approximately $2.69 billion of that total.

The latest attacks have disrupted aviation in Saudi Arabia, with Pakistan International Airlines suspending flights to Riyadh last week.

Ghani said any impact on remittances would depend on whether the disruptions persisted long enough to affect Pakistani workers’ employment, earnings or travel.

“However, unlike higher oil prices, which can quickly inflate the import bill, airport disruptions will only affect remittances only if they persist long enough to impact workers’ earnings, and mobility,” he said.

Ahmed noted that Pakistani expatriates have historically increased financial support for their families during difficult economic periods.

“Historically, we have seen that the expat community has positively contributed to negate this impact and they send more to their households in such scenarios, which supplements their overall savings,” he said.