Saudi-Pakistan Defense Pact and Its Energy Implications
Saudi Arabia’s recent mutual defense agreement with Pakistan is unlikely to disrupt the kingdom’s vital crude oil exports to India, according to a senior source familiar with the matter who spoke to CNBC on condition of anonymity. The pact, aimed at bolstering Riyadh’s security through expanded alliances, is not expected to affect longstanding commercial ties with one of the world’s largest crude consumers. “Of course,” the source affirmed when asked if India would continue purchasing Saudi barrels, underscoring that energy trade remains a priority alongside geopolitical realignments.
India’s Strategic Role in Saudi Crude Exports
India, which has a longstanding conflict with Pakistan, is a critical energy partner for Saudi Arabia. Data from Kpler indicates that Saudi Arabia supplied over 600,000 barrels per day to India in July 2025, positioning it among India’s top three crude suppliers alongside Russia and Iraq. Industry observers emphasize that despite geopolitical tensions, Saudi Arabia continues to balance its security partnerships with the United States and Pakistan while expanding energy trade with India, a fellow BRICS member.
Dollar Pricing Remains Central to Saudi Oil Trade
The source also addressed persistent rumors regarding Saudi Arabia’s potential move away from pricing oil in U.S. dollars, describing these claims as a “phantom agreement.” The dollar remains the foundation of Saudi crude exports despite Riyadh’s diversification of alliances.
Indian Government Response and Security Considerations
India’s Ministry of External Affairs acknowledged awareness of the new pact, which formalizes a longstanding informal arrangement between Saudi Arabia and Pakistan. The ministry stated it will closely study the implications for India’s national security as well as regional and global stability.
“We will study the implications of this development for our national security as well as for regional and global stability,” said the Ministry of External Affairs.
Shifting Gulf Security Dynamics
The pact was signed in Riyadh by Saudi Crown Prince Mohammed bin Salman and Pakistani Prime Minister Shehbaz Sharif amid growing unease in Gulf states over U.S. defense commitments, particularly following Israel’s strike inside Qatar. Rashmi Garg, senior portfolio manager at Al Dhabi Capital, highlighted this strategic recalibration: “They’re pivoting to other partners because there is this perception that the U.S. will not honor its promises as it used to do.” Nonetheless, Gulf countries maintain strong ties with the U.S., with no immediate disruptions in trade or tariffs.
India’s Expanding Gulf Partnerships
Parallel to Saudi-Pakistan developments, India is actively strengthening its Gulf relations. Commerce Minister Piyush Goyal recently visited the UAE to review progress on the UAE-India Comprehensive Economic Partnership Agreement. Abu Dhabi remains a major crude supplier, delivering approximately 400,000 barrels per day to India as of June 2025.
Market Impact and Price Outlook
Market analysts express skepticism about any significant or prolonged impact on oil prices due to the pact. Manpreet Gill, CIO for Africa, Middle East, and Europe at Standard Chartered Wealth Management, noted that geopolitical events in the region have historically resulted in only temporary price fluctuations. He anticipates West Texas Intermediate (WTI) crude futures to remain near $65 per barrel in the near term.
FinOracleAI — Market View
Saudi Arabia’s defense pact with Pakistan represents a strategic diversification of security alliances amid evolving geopolitical uncertainties. However, it does not compromise Riyadh’s commercial energy ties with India, a cornerstone of its crude export market.
- Opportunities: Continued stable oil supply to India supports energy security and bilateral trade growth.
- Risks: Potential regional tensions could create short-term volatility in energy markets.
- Geopolitical Balance: Saudi Arabia’s ability to maintain relations with the U.S., Pakistan, and India reflects nuanced diplomacy.
- Market Stability: Oil prices likely to remain within a moderate range barring unforeseen geopolitical shocks.
Impact: Neutral — The pact solidifies Saudi security partnerships without disrupting critical energy exports to India, maintaining market equilibrium for now.
