The Pakistan Stock Exchange (PSX) endured a turbulent trading session on Thursday, as the KSE-100 Index plunged by more than 2,200 points, driven by intensified geopolitical tensions and uncertainty in global financial markets. The sharp decline was triggered by a wave of panic selling that erased recent gains and rattled investor sentiment across sectors.
By 3:15 PM, the benchmark KSE-100 index was trading at 115,015.96 points, reflecting a significant drop of 2,210.18 points or 1.89% from the previous close of 117,226.15. The sell-off marks one of the steepest single-day declines in recent weeks and signals growing anxiety among market participants.
The downturn appears to be linked, in part, to escalating tensions between Pakistan and India. On Wednesday, India suspended the Indus Waters Treaty, a pivotal water-sharing agreement with Pakistan, following a deadly attack in Indian Illegally Occupied Jammu and Kashmir (IIOJK). The incident, which resulted in the deaths of 26 tourists in Pahalgam, has been blamed on Pakistan by Indian authorities. The geopolitical fallout from this development added fuel to an already fragile market environment.
While domestic tensions triggered the initial shockwave, global factors further exacerbated the decline. On the international front, markets were already on edge amid mixed signals from the Trump administration regarding tariffs on China and the future of Federal Reserve leadership.
Earlier this week, President Donald Trump publicly criticized Fed Chair Jerome Powell, only to later walk back suggestions of a leadership change, injecting further confusion into global investor narratives. Meanwhile, conflicting reports about U.S. tariff policy on Chinese imports added another layer of volatility. Although the Wall Street Journal reported that the White House might consider reducing tariffs on Chinese goods, Treasury Secretary Scott Bessent clarified that no such decision would be taken unilaterally, echoing caution from White House spokesperson Karoline Leavitt.
The global uncertainty has impacted equity markets worldwide, and Pakistan’s stock market proved no exception. Foreign investors appeared cautious, while local institutions and retail participants opted to de-risk portfolios ahead of the weekend, fearing further negative headlines.
Broader Asian markets also struggled to find direction, and the rebound in the U.S. dollar lost steam, offering little support to risk assets. Investors continued to parse through policy signals in search of clarity on monetary policy and trade strategy, both of which remain in flux.
The PSX’s steep decline underscores how deeply intertwined domestic and global developments have become in shaping market dynamics. For Pakistan, where investor confidence is still recovering from economic restructuring efforts and inflationary pressures, any geopolitical flashpoint or external volatility can quickly translate into heightened market stress.
Analysts now await clarity on the diplomatic front as well as key upcoming economic data points that could offer a direction for the market. Until then, volatility is expected to persist, and cautious trading may remain the norm.