The ongoing conflict in the Gulf has significantly reduced foreign investment in Pakistan, with Bahrain withdrawing $30m from domestic bonds within the first 10 days of the fiscal year 2026-27.

The State Bank of Pakistan reported no foreign inflows during this period, highlighting the adverse effects of the war on the country's financial stability.The US-Israeli conflict with Iran has driven up oil prices, exacerbating economic challenges for Pakistan.While the UAE and Saudi Arabia provided temporary relief by offsetting losses, the overall trend remains negative.Only Luxembourg contributed $4m to treasury bills, offering minimal relief.Experts warn that prolonged conflict could harm remittances, a critical economic pillar.The article underscores the need for policy reforms to attract investment and stabilize exports amid regional instability.Security issues and stagnant exports further threaten economic growth, with forecasts indicating growth below 4pc.The situation highlights the interconnectedness of regional conflicts and Pakistan's economic vulnerabilities.