Beyond the Gulf energy crisis: Turning vulnerability into strategic leverage
Recent disruptions in energy markets have exposed how quickly and unevenly external shocks travel. Take the case of India and Pakistan. As significant importers of Middle East hydrocarbons, both are feeling the strain, although their ability to absorb this pressure varies. Pakistan, with a fiscal deficit at ~5.6% of GDP for FY2025 and sovereign rating of B- by S&P, faces a more immediate squeeze. India faces the shock with relatively stronger buffers, supported by a fiscal deficit of ~4.4% of GDP for FY2026 and a rating of BBB by S&P.
However, this raises a larger question. Shocks like this force a hard look at how countries reduce vulnerabilities, strengthen their strategic leverage and position themselves so that future crises are not only absorbed, but also used to shape global interest in their favour. While that question leads in vastly different directions in the case of India and Pakistan; for India specifically, doing so could unlock the opportunity to scale-up economic partnerships exponentially with strategic partners like Israel.
India’s strength lies in its growth-driven economy and the scale of its domestic demand, now the 5th largest consumer market backed by a strong ~7.6% growth in GDP in FY2026. Pakistan’s lies in its geography, positioned at the strategic crossroads of South Asian consumption, Persian Gulf energy, Chinese manufacturing, and Central Asian connectivity. Both are sources of leverage. But one builds through demand-side pull that compounds over time, while the other depends on geographic activation that becomes most visible when crises make location matter.
The current Persian Gulf energy shock makes this contrast hard to miss. Pakistan’s geography allows it to activate relevance. Its proximity to key regions gives it a role in diplomatic engagement during crises, as seen with hosting the recent talks in Islamabad. India’s approach operates differently. It is more about insulation, built over time through economic depth, rising purchasing power, sustained investments, and deeper integration into business systems. This reflects a deliberate effort to convert economic scale into resilience.
And this divergence is likely to shape how both countries are seen in the coming years.
India’s demand-side gravity is becoming harder to ignore. As one of the largest and fastest-growing consumer markets, it is reshaping how investors and companies in key economies think about allocating investments, linking supply chains, and long-term positioning.
This creates a quieter but more durable form of leverage. Over time, countries and companies develop an economic stake in India’s continued stability and growth. In periods of tension, this translates into restraint, because the cost of disengagement is high. Yet this advantage must be built deliberately.
For India, three priorities stand out, and all of these offer scope to drive and scale-up economic partnerships with strategic partners like Israel. First, India must move beyond being primarily a consumption market and become a production base that global supply chains can partner with. This requires sustained investment in manufacturing, logistics, and infrastructure so that India becomes embedded in how the world produces, not just where it sells. Second, it must lock in long-term relationships through trade agreements and sectoral partnerships. Market size attracts interest, but interdependence creates switching costs. The more countries rely on India across trade and services, the more cautious they become during geopolitical friction. Third, India must leverage its strengths in software and services to scale export partnerships in digital infrastructure and financial architecture. When other countries plug into Indian-built services, dependence deepens in ways that are more enduring.
Taken together, these steps can turn economic growth into compounding strategic leverage, making India increasingly difficult to ignore or disengage from.
Pakistan’s strength lies in its geography, connecting geopolitical regions central to energy, trade, security, and connectivity. This becomes visible during disruption, when routes, access and proximity matter most.
This is where its strategic leverage activates, with geography translating into immediate influence when tensions escalate. But geography alone is not enough. Without consistency, this only produces episodic relevance rather than sustained advantage.
For Pakistan, the priorities are clear. First, connectivity must move from concept to function. Trade and energy corridors need to operate reliably at scale if Pakistan aspires to become a preferred route for regional flows. In short, geography needs to be monetised. Second, policy stability is key. Geography attracts interest, but predictability retains it. A stable macro- and regulatory environment would be critical to converting crisis-driven relevance into long-term engagement. Third, Pakistan needs to position itself more concretely as a connector state, not just conceptually but physically, by linking the Gulf, China, and Central Asia at scale. That would make its role structural rather than situational.
Only if these elements come together, can geography evolve into sustained strategic leverage rather than something episodic during crises.
In essence, the contrast between the two approaches is structural. India’s advantage compounds, building resilience through growth. Pakistan’s advantage activates, offering immediacy.
This difference will shape how the world’s interest evolves. India is likely to be seen as the go-to partner within economic systems, while Pakistan will continue to be viewed as the go-to partner in regional geopolitics. Both positions carry weight, but they influence interest in separate ways.
In the years ahead, global reactions will depend more on these underlying realities. When the next shock comes, the question will not simply be who is affected, but who has reduced vulnerability, who is more embedded and connected, and who the world becomes least willing to disengage from.