Pakistan's economy has suffered significant losses of $1.4 billion over the past seven months due to geopolitical tensions disrupting trade flows and export activity, according to a report by Kabul Now. The analysis identifies border tensions with Afghanistan and the ongoing Middle East crisis as the primary drivers of these economic disruptions, highlighting the substantial impact of regional instability on Pakistan's economic performance. The report describes these tensions with Afghanistan and the wider Middle East conflict as two major shocks to Pakistan's economy, with the conflict involving Iran further damaging export activity across Gulf markets.
The country lost nearly $850 million due to the closure of border crossings with Afghanistan between October 2025 and May 2026, as reported by Kabul Now. Major border crossings including Torkham, Spin Boldak and Bahramcha were shut following military exchanges between both sides, severely affecting trade flows and supply chain operations. The prolonged disruption has forced Afghanistan to increasingly rely on alternative trade routes, including Iran's Chabahar Port and transport corridors linking China and Central Asia, reducing dependence on Pakistani transit networks. The extended closure of trade routes has disrupted supply chains, affected movement of food, fuel and consumer goods, and caused heavy financial losses for traders and transport operators on both sides of the border.
Pakistan's transport industry has been significantly affected, with transport companies that previously earned around $200 million annually through Afghan transit and passenger vehicle movement seeing operations disrupted following prolonged border closures. According to the report, the transport sector has been particularly vulnerable to the regional instability, as it relied heavily on cross-border transit operations that have now been severely restricted. The deterioration in trade relations between Pakistan and Afghanistan stems largely from disputes over the presence of Tehreek-e-Taliban Pakistan (TTP) fighters in Afghanistan, which gradually escalated from border tensions into wider hostilities.
Despite Pakistan's overall trade volume reaching nearly $28 billion during the past nine months, it still marked a decline of about 23 per cent compared to the same period last year, as reported by Kabul Now. The deterioration in trade relations between Pakistan and Afghanistan has been particularly pronounced, with bilateral trade falling from $2.46 billion in 2024 to $1.77 billion in 2025. The ongoing regional conflict has further weighed on Pakistan's external trade, with hostilities involving Iran and broader Middle East instability resulting in nearly $600 million in export-related losses across Gulf markets. The extended closure of trade routes has disrupted supply chains, affected movement of food, fuel and consumer goods, and caused heavy financial losses for traders and transport operators on both sides of the border.
