Key Takeaways
- Analysts predict inflation to decrease to 10.25-10.75% year-on-year in September.
- Oil prices remain a key factor, expected to hover around $100 per barrel.
- Pakistan’s foreign exchange reserves may provide some cushion against higher oil import costs.
Some stakeholders and analysts expect inflation in September to slow, despite ongoing uncertainties, particularly due to the Gulf war.
The financial sector anticipates oil prices to remain between $90 and $100 per barrel during the remaining days of September and in October.
However, the situation has changed after US President Donald Trump rejected Iran’s proposal for the Gulf war, raising concerns about potential attacks from the US.
Iran’s anticipation of possible attacks has led to increased concerns that oil prices could surge, though analysts expect prices to remain around $100 per barrel if the war resumes.
Pakistan imports 70% of its oil and gas requirements, making inflation highly sensitive to oil prices. The official headline inflation rose to 11.1% year-on-year in August 2026, up from 9.2% in July.
Topline Securities report projects the Consumer Price Index (CPI) for September to rise 10.25-10.75% year-on-year, down from 11.1% in August, though this is not a significant decline.
Petroleum prices have been rising daily in Pakistan and have reached the highest level in the region, with India increasing petrol prices by 10% and Bangladesh by 16%, while Pakistan increased prices by over 50%.
S.S. Iqbal, a money market expert, stated, 'It is not easy to assess the exact inflation figure for September as oil prices have been changing both internationally and locally. We can only expect slightly lower inflation, with a fear that it may remain close to last month’s level.'
With inflation expected to remain at 10.25-10.75% in September 2026, real interest rates are likely to stand at 75-125 basis points, lower than Pakistan’s historical average of 200-300 basis points, according to the Topline report.
Electricity, housing, food, and construction costs have also witnessed increases, suggesting that inflation could come in above analysts’ expectations, particularly if the Gulf war continues for an extended period.
Pakistan, Turkiye, and Saudi Arabia are preparing to respond to a possible new conflict involving the Houthis and the kingdom, adding to uncertainty over oil prices and supplies.
Any disruption could have a direct impact on Pakistan’s economy and inflation. However, Pakistan’s foreign exchange reserves, currently exceeding $21.4 billion, may provide some cushion against higher oil import costs.
It is not easy to assess the exact inflation figure for September as oil prices have been changing both internationally and locally. We can only expect slightly lower inflation, with a fear that it may remain close to last month’s level.
S.S. Iqbal, Money market expert
