Pakistan’s inflation rate returned to double digits in August, climbing to 11.1 percent from 9.2 percent in July and matching June’s level. The six-month average from March to August is less dramatic, at about 10.2 percent, and some of the pressure will fade as base effects roll over. The more consequential question is what happens to energy and shipping costs, and the answer is increasingly being decided in the Red Sea and the Gulf.

Last week’s attack on Saudi Arabia’s East-West oil pipeline matters less for the barrels it temporarily removed from the market than for what it reveals about redundancy. Saudi Arabia built the pipeline to bypass the Strait of Hormuz, carrying crude from its eastern fields to the Red Sea port of Yanbu. With Hormuz already constrained, the line had become part of the world’s emergency energy infrastructure. Energy markets absorb disruption because they have backups: alternative pipelines and ports, spare tanker capacity and inventories. Inflation turns dangerous when those backups start failing at the same time.

The Houthis have not claimed the pipeline strike, and Saudi Arabia says the drones were launched from Iraq. But that should not obscure the larger picture. The Houthis have separately blockaded Saudi shipping in the Red Sea and seized Perim Island at the mouth of the Bab el-Mandeb strait. Lloyd’s List estimates that traffic through the strait fell by about 24 percent after the blockade began, and Saudi tankers have become harder to track as operators avoid the route or switch off their transponders. A geopolitical shock can become an economic one without a single ship sinking, because insurance and freight markets move first. Lloyd’s List has reported war-risk cover for high-risk Gulf vessels rising to about 10 percent of hull value, up from 1 percent or less before the crisis. The cost of moving cargo can climb well before the cargo itself becomes scarce.

When that infrastructure becomes unreliable, inflation can arrive before the shortage does.

- Javed Hassan

That distinction matters for Pakistan, which is exposed not only to crude prices but to the cost of shipping almost everything it imports. During the earlier phase of the Gulf conflict, shipping lines imposed emergency war-risk surcharges of $1,500 to $3,500 per standard container, according to the Federation of Pakistan Chambers of Commerce and Industry. The government later challenged some of these charges, but the episode showed how the mechanism works. A higher insurance premium, a bigger risk allowance or a longer route all raise the delivered price of cargo, whether or not a Pakistan-bound ship is ever attacked.

The Suez route shows how fragile this is. Traffic is recovering as operators cautiously return to the shorter passage, but Lloyd’s List Intelligence counted only about 290 vessels at the northern Red Sea chokepoint in the last week of August, roughly 36 percent below normal. A fresh escalation could reverse that and push more ships around the Cape of Good Hope, a longer voyage that needs more time and more vessels to carry the same cargo. Pakistan would feel that cost even on routes that never touch the Red Sea, because it tightens shipping capacity everywhere. Counting lost barrels is the wrong frame. When shipping is constrained, the second-order shock to insurance, freight and working capital can matter more than the first-order shock to supply, and it reaches consumers all the same.

Nor is this a passing disturbance. Iran and its allies do not need to close every shipping lane to impose costs. They only need to make those lanes uncertain enough that insurers, shipowners and traders start protecting themselves. That is coercion through uncertainty, and it argues for treating the price of access, not just the price of crude, as central to Pakistan’s inflation outlook.

It is also worth being precise about what the Makkah Joint Defense Agreement, signed by Saudi Arabia, Pakistan and Türkiye on August 7, actually covers. It commits each signatory to treat an attack on one as an attack on all. But Saudi Arabia and its partners face a genuine bind: escalation risks widening the conflict, while restraint lets non-state actors keep imposing costs on critical infrastructure.

Political reassurance does not by itself create a coalition willing to enter a broader confrontation, and the pact does not appear to have been designed with tanker insurance or Suez routing in mind. The sharper questions for Islamabad are what the agreement commits Pakistan to if shipping lanes serving its own ports are disrupted, and whether the navy has the assets to deliver if called upon. Those are questions for defense planners. They are no substitute for tracking the freight and insurance data already pushing up Pakistan’s import bill.

The lesson of the Red Sea crisis is simple. Globalization depends not only on production and trade but on the invisible infrastructure that makes trade predictable. When that infrastructure becomes unreliable, inflation can arrive before the shortage does.

Javed Hassan has held senior executive roles in both the for-profit and non-profit sectors in Pakistan and internationally. He is a former Senior Visiting Fellow at Fudan University, Shanghai.