KARACHI: Pakistan’s trade deficit with Gulf markets nearly halved in July as energy imports fell sharply, with analysts this week linking the decline to disruptions around the Strait of Hormuz and increased production by domestic refineries.

The combined deficit with Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain, Qatar and Oman fell 46.5 percent to $750.5 million from around $1.4 billion a year earlier, according to State Bank of Pakistan data.

Imports from the six GCC markets declined 38.1 percent to $1.04 billion, while exports rose 4.7 percent to $290.3 million.

Pakistan relies heavily on Gulf suppliers for crude oil, refined petroleum products and liquefied natural gas, leaving its import bill particularly exposed to disruptions in the region and around the Strait of Hormuz, a critical route for global energy shipments.

“There are multiple reasons, blocked Strait of Hormuz, domestic refineries production optimization,” Shankar Talreja, head of research at Topline Securities, told Arab News.

Pakistan imported no high-speed diesel in July, Talreja said, while petrol imports also declined as domestic refineries increased production.

The country’s energy supplies have also faced disruption from Qatar, its largest supplier of liquefied natural gas (LNG), amid the ongoing conflict in the Middle East. According to the State Bank of Pakistan (SBP), Pakistan’s July imports from Qatar shrank 78 percent to $61.5 million while exports declined 16 percent to $7.42 million on a year-on-year basis.

Pakistan’s imports from Oman rose 58 percent to $161 million, with exports down 11.3 percent to $20.5 million.

Pakistan imported $1.28 billion worth of petroleum products, including crude oil, LNG and LPG, in July, which marks a 5.2 percent decrease from the same month last year, according to the Pakistan Bureau of Statistics (PBS).

According to Topline Securities data, Pakistan’s refined energy product volumes rose 16 percent over the last two years to 11.7 million tons. Within the production mix, refineries have reduced the Furnace Oil (FO) share from 24.5 percent in FY24 to 20.8 percent in FY26, while the High-Speed Diesel (HSD) share has increased from 44.3 percent to 48.5 percent over the same period.

The decline in FO production is primarily attributable to product optimization by refineries and a shift toward lighter crude, which yields lower FO volumes, said the brokerage firm in a research note shared with Arab News.

“By optimization, I mean, gradually they are converting their FO in refined products,” said Talreja.

The sharp decline in imports came alongside a smaller increase in Pakistani exports to the Gulf markets, which rose 4.7 percent from a year earlier.

Exporters said Pakistan’s proximity to the Gulf had provided an advantage as conflict disrupted longer shipping routes and increased freight costs for some competing suppliers.

“We have received a little preference because we are closer to the Middle East and, of course, our shipment time is much shorter than the competitors,” Malik Faisal Jahangir, chairman of the Rice Exporters Association of Pakistan, told Arab News.

Pakistan’s overall rice exports increased 19.2 percent year-on-year to around $200 million in July, according to official data, though the figure includes shipments to markets outside the Gulf.

Jahangir said Gulf demand contributed to the increase as buyers sought supplies from markets closer to the region, though he did not share country-specific figures for Gulf markets.

Food, agricultural goods and basic textiles were among the Pakistani products seeing stronger demand in Gulf markets, exporters said.

Rai Omer, chief financial officer of fruit exporter SE Fruits, said his company had received inquiries from buyers in Saudi Arabia and other Gulf states for Pakistani produce.

“We are observing increased demand and growing customer interest across our key Middle Eastern markets, particularly the UAE, Saudi Arabia and Oman,” said Omer.

Pakistan has long run a large trade deficit with Gulf economies because the value of its energy imports substantially exceeds its exports to the region. Saudi Arabia and the UAE are also among Pakistan’s most important economic partners and major sources of remittances and investment.

The July figures suggest the balance shifted sharply for at least one month as energy purchases declined while exports registered modest growth, though analysts cautioned that the trend would depend heavily on energy prices, regional supply disruptions and Pakistan’s import requirements in the coming months.