Infostani International: Escalating tensions between Pakistan and Iran led to a more than 350-point drop in the Pakistan Stock Exchange (PSX) on Thursday. The KSE-100 index initially fell but later recovered, reflecting investor concerns about the geopolitical situation. The impact extended to Pakistan’s international bonds, with notable declines reported.
Escalating Iran-Pakistan Tensions Trigger Volatility: Pakistan Stock Exchange and International Bonds React
On Thursday, escalating tensions between Iran and Pakistan led to a loss of more than 350 points in shares at the Pakistan Stock Exchange (PSX). The KSE-100 index experienced a sudden drop of around 1,038 points at 10:08 am, attributed to the news of rising Pakistan-Iran tensions, according to Mohammed Sohail, Chief Executive of Topline Securities. By 3:34 pm, the index recovered to 63,202.40, marking a decrease of 364.93 points from the previous close of 63,567.33.
Iran had launched attacks in Pakistan targeting bases of the militant group Jaish al-Adl in Panjgur, Balochistan, leading to condemnation from Islamabad and a downgrade in diplomatic ties. In response, Pakistan stated it had struck terrorist hideouts in Iran’s Siestan-o-Baluchistan province.
Raza Jafri, Head of Equities at Intermarket Securities, mentioned that border tensions with Iran were impacting investor sentiment, countering positive factors such as a healthy current account surplus and the UAE’s debt rollover. Yousuf M. Farooq, Director of Research at Chase Securities, noted the market’s unfavorable response to Pakistan’s retaliatory attack on Iran and concerns about potential escalation.
Factors Influencing Market Recovery Amidst Pakistan-Iran Tensions and Bond Decline
However, he highlighted a modest recovery from the initial drop, supported by robust current account numbers, the UAE debt rollover, and a tranche release by the International Monetary Fund (IMF). Farooq expressed investor anticipation of a diplomatic resolution, indicating that the 1% decline in the first hour of trading did not necessarily reflect panic among investors. Additionally, international bonds of Pakistan experienced a fall, with the 2026 bond seeing a decline of 1.2 cents to trade at 71.125 cents in the dollar, following strikes conducted inside Iran as announced by the foreign ministry.