Pakistan has raised petrol and diesel prices by more than 20 percent following a sharp surge in global oil markets linked to conflict in the Middle East. Economists warn the move will slow the country’s fragile economic recovery, push inflation higher and place additional strain on households and businesses.

Analysts say growth, previously projected to exceed 4 percent next year, may now fall short as higher fuel costs ripple through the economy. Inflation, which recently climbed to a 16 month high of 7 percent, is expected to rise further in the coming months. There are also concerns that the central bank may keep interest rates elevated or raise them to contain price pressures.

Business leaders argue the increase will raise inland freight charges by up to 30 percent and worsen production costs, particularly in the textile sector, the country’s largest export industry. With exports already declining and the trade deficit widening, industrialists fear higher energy and transport costs, along with possible gas shortages, will further weaken exports and expand the import bill.