Pakistan has emerged as a pivotal mediator in the U.S.-Israel conflict with Iran, with Prime Minister Shehbaz Sharif and Field Marshal Asim Munir — Chief of Army Staff and Chief of Defence Forces — elevating the country's diplomatic profile to the point where Foreign Affairs declared, "Pakistan Won the War in Iran." Pakistani leadership maintains working relationships with both Washington and Tehran, motivated not by idealism but by the enduring reality that the two nations are, as officials have emphasized, "neighbors forever." Their focus is firmly on the post-war landscape, where substantial reconstruction needs and emerging opportunities will define the bilateral agenda.

Relations between Pakistan and Iran continue to deepen across security, border management, and economic cooperation. This trajectory persists even as the Islamic Revolutionary Guard Corps (IRGC) — designated by the United States as a Foreign Terrorist Organization since 2019 — and other security institutions consolidate influence in Tehran following Israeli and U.S. strikes in 2025 and 2026, the assassination of Supreme Leader Ali Khamenei, and the elevation of his son Mojtaba Khamenei — who maintains close ties to the IRGC — as the new Supreme Leader. Notably, many civilian officials, including Speaker of Parliament Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi, are IRGC veterans.

Political Landscape in Tehran

Mojtaba Khamenei holds the formal title of Supreme Leader but has kept a low public profile, partly due to injuries sustained in the initial strikes and ongoing security concerns. The U.S. and Israel eliminated approximately fifty political, security, and military leaders in 2026, shifting Iran's decision-making toward a decentralized, collective, security-dominated structure centered on the IRGC and the Supreme National Security Council (SNSC).

Key figures include IRGC Commander-in-Chief Brigadier General Ahmad Vahidi and other seasoned security officials who may demonstrate greater risk tolerance than their predecessors. SNSC head Ali Larijani — a pragmatist and IRGC veteran — was assassinated by Israel. This consolidation has reinforced a security-first approach to foreign policy, though it has not precluded pragmatic outreach to neighboring countries.

The broader U.S.-Iran conflict remains volatile. A Pakistan-brokered Islamabad Memorandum of Understanding in mid-June 2026 temporarily suspended hostilities and addressed issues including the Strait of Hormuz — the narrow chokepoint through which roughly one-fifth of global oil consumption routinely passes — but the truce collapsed by mid-July amid renewed strikes and mutual accusations of violations. Pakistan continues exploratory mediation efforts with Chinese backing, and Iranian officials have signaled openness to Islamabad's role.

Recent Bilateral Developments

High-level engagement has intensified significantly. Iran's Interior Minister Eskandar Momeni, an IRGC veteran, visited Pakistan twice in July 2026, meeting with Prime Minister Sharif, Field Marshal Munir, and Interior Minister Mohsin Naqvi. The discussions covered regional security, bilateral cooperation, and peace initiatives. Both sides pledged enhanced collaboration on counterterrorism, border management, cybersecurity, immigration, narcotics trafficking, and human smuggling, while identifying shared threats along the approximately 900 km border — a restive frontier straddling the shared Balochistan region that has witnessed periodic cross-border militant attacks and retaliatory strikes by both sides — and from Afghan-related militancy.

Economic objectives are central to the relationship. Both countries committed to raising bilateral trade from approximately $3 billion toward $10 billion through improved transport links, customs facilitation, railway upgrades — including the Taftan-Mirjaveh crossing and related corridors — increased truck movements, and the development of border special economic zones.

Stability in both nations is critical to realizing their potential within China's Belt and Road Initiative (BRI). Pakistan hosts the China-Pakistan Economic Corridor (CPEC), the BRI's most expensive component. Iran and China are partners under the 2021 "Comprehensive Strategic Partnership Agreement," a twenty-five-year cooperation framework envisioning potential investments of $400 billion, though the actual amount disbursed remains undisclosed. Iran also hosts the longest section of the International North-South Transport Corridor (INSTC), connecting India to Russia, and Aprin Dry Port near Tehran serves as the terminus of the China-Iran rail corridor, which cuts transit time in half compared to maritime routes.

Iranian officials have publicly praised Pakistan's constructive diplomatic role in regional de-escalation and called for expanded strategic cooperation. Pakistani leaders have reciprocated, emphasizing readiness for broader engagement. President Pezeshkian visited Pakistan in June 2026 in part to express gratitude to Prime Minister Sharif for Pakistan's mediation efforts.

Impact of Iran's Security-Dominated Leadership

A Tehran increasingly dominated by the IRGC and security institutions is likely to prioritize practical, threat-focused engagement with Pakistan over ideological posturing that could generate friction.

Security alignment represents a net positive. Shared concerns over Baloch militancy, cross-border crime, and regional instability align directly with IRGC priorities. Direct engagement between Iranian security figures and Pakistan's military and intelligence leadership — exemplified by the Momeni-Munir meetings — facilitates coordination, intelligence sharing, and joint operational mechanisms. Border stabilization serves both countries' internal security interests while supporting shared economic objectives.

Economic and connectivity initiatives continue in parallel. Security cooperation helps establish the conditions necessary for trade and infrastructure development. The IRGC and allied religious charitable foundations, known as bonyads, are alleged to control approximately 50% of Iran's economy. Their interests in energy, construction, and logistics could support cross-border initiatives, though sanctions on IRGC entities — reinforced by the U.S. FTO designation, which carries criminal penalties for material support — and bonyads constrain the scope of formal or large-scale agreements. Informal flows of energy and goods already exist, and greater stability could enable formalization of more of these exchanges if broader sanctions dynamics improve.

Both countries' leaders are reportedly taking a personal interest in economic connectivity. The Times of Israel reported that Field Marshal Munir and General Vahidi participate in a private oil transport venture. Following a recent Iranian attack on Saudi Arabia, Munir reportedly warned Vahidi that further attacks would endanger the venture, and the attacks subsequently ceased.

A complication for Iran is Chabahar Port, which was built by India — a U.S. ally — and was subsequently attacked by American forces. Closer Iran-Pakistan ties may prompt India to reconsider additional investment in Iran.

Diplomatic goodwill generated through Pakistan's mediation persists. Islamabad's facilitation of earlier U.S.-Iran contacts and its continued willingness to mediate have earned appreciation from Iranian officials, including those within the security apparatus. This positions Pakistan as a dependable neighbor and key interlocutor amid Iran's current isolation.

Potential constraints remain. A harder IRGC line on the wider conflict — whether involving proxies, Strait of Hormuz leverage, or a broader resistance posture — could complicate Pakistan's simultaneous relationships with the U.S., Saudi Arabia, and Gulf petro-states. Escalation risks or secondary sanctions effects could slow economic ambitions, and decision-making fragmentation in Tehran may produce delays or mixed signals.

A significant concern is a recent report that China is transshipping surface-to-air missiles to Iran via Pakistan. A Chinese government spokesman stated he had no knowledge of the matter, while President Trump said he would be "quite disappointed," noting that Chinese President Xi Jinping had assured him China would not intervene on Iran's behalf.

Future Outlook

Near-to-medium-term prospects appear positive and security-driven, with continued high-level meetings, coordination on border security and counterterrorism, and incremental progress on trade and connectivity. Pakistan is likely to maintain its dual role as mediator and bilateral partner, pursuing energy access, expanded economic activity, regional stability dividends, and a favorable atmosphere in Washington should future support from the International Monetary Fund become necessary — a recurring reality for Islamabad, which has entered more than twenty IMF programs since the late 1980s. Iran benefits from a stable eastern flank and a trusted interlocutor.

Risks include further regional escalation — potentially straining Pakistan's balancing act, including its mutual defense pact with Saudi Arabia — persistent sanctions limiting formal trade agreements, and internal Iranian political dynamics that could produce more assertive policies. Nevertheless, mutual interests in border control, anti-militancy efforts, and economic complementarity provide a durable foundation that has withstood the 2026 conflict.

Pakistan's elites have historically leveraged the country's geographic position, though often for short-term gains, as seen during the Cold War and the Soviet and U.S. invasions of Afghanistan. If Pakistan applies its newfound influence strategically and adopts a long-term perspective, it can help ensure the success of regional connectivity initiatives — including CPEC, INSTC, and the Uzbekistan-Afghanistan-Pakistan (UAP) Railway Project, a planned rail link designed to connect landlocked Central Asia to Pakistan's Arabian Sea ports at Gwadar and Karachi — positioning itself for sustained economic growth and a leadership role in Eurasia.

By James Durso for OilPrice.com