PSX down 6.3% amid escalating Gulf war

Records historic crash on oil supply fears; investors cautious about IMF review

KARACHI:

The Pakistan Stock Exchange's (PSX) KSE-100 index experienced a sharp decline in the outgoing week, closing at 157,496 points, down 6.3% week-on-week, or 10,566 points.

This follows last week's fall and brings the cumulative decline from its January 2026 peak of around 189,167 points to nearly 17%. The sell-off was driven by heightened geopolitical tensions stemming from the US-Iran conflict, which has rattled regional markets and prompted investors to reduce exposure amid fears of broader instability, rising energy prices and domestic security concerns.

On a day-on-day basis, the PSX commenced the week with its historical single-day decline as the benchmark KSE-100 index plunged 16,089 points, or 9.57%, to close at 151,973. Next day, it staged a partial recovery, with the index advancing 5,159 points, or 3.39%, at 157,132.

On Wednesday, however, the PSX witnessed a directionless session, when the KSE-100 closed at 155,777, down 1,355 points (-0.86%). The PSX recorded a sharp rebound on Thursday, with the benchmark index gaining 5,433 points (+3.49%) to close at 161,211. The market closed the week on a cautious note as the KSE-100 dropped by 3,715 points (-2.30%) to settle at 157,496.

In its weekly report, Arif Habib Limited (AHL) mentioned that the KSE-100 index witnessed a lacklustre performance during the outgoing week, closing at 157,496 points, down 6.3% WoW (10,566 points) amid geopolitical tensions due to the US-Iran conflict. The Consumer Price Index (CPI) for February 2026 hit 7% year-on-year, the highest level since October 2024, compared to 5.8% in January 2026.

Among other economic data, a trade deficit of $3 billion was recorded in February. Exports amounted to $2.3 billion (-8% YoY) while imports reached $5.3 billion, down 1.6% YoY. Total cement dispatches for the month rose 12.53% YoY to 4.19 million tons compared to 3.73 million tons in February 2025. Provisional urea offtake remained subdued, falling 28% YoY to 251k tons, marking the lowest monthly offtake.

AHL mentioned that gas production edged down 0.1% WoW to 2,687 million cubic feet per day (mmcfd) in the fourth week of Feb'26, while oil output fell 2.9% WoW to 59,103 barrels per day. A total of Rs581.7 billion was raised in the T-bill auction on Wednesday, with yields increasing across all tenors by 21.5 to 39.3 basis points. The government's debt increased by 1% month-on-month to Rs79.3 trillion (+10% YoY) as of Jan'26 against Rs72.1 trillion in Jan'25.

Pakistan's liquid foreign exchange reserves were recorded at $21.4 billion, up by $26.2 million, comprising $16.3 billion with the State Bank and $5.1 billion with commercial banks, AHL added.

Muhammad Waqas Ghani, Head of Research at JS Global, noted that the KSE-100 extended its decline during the week as heightened geopolitical tensions weighed on the market. The index dropped 10,566 points (-6.3%) WoW, following last week's 5,108-point decline, pushing the cumulative fall from its January 2026 peak of 189,167 points to nearly 17%.

Market activity remained volatile throughout the week as investors continued to reduce exposure amid regional tensions and domestic security concerns. Sentiment also remained cautious ahead of key macro developments, with the IMF mission currently engaging with Pakistani authorities for the third review of the loan programme.

According to the Pakistan Bureau of Statistics, the inflation clocked in at 7% YoY for Feb'26, the highest since Oct'24. "We expect the SBP to keep its policy rate unchanged at 10.5% in the upcoming meeting as rising global oil prices may add to inflationary pressures," he said.

Pakistan was exploring options to manage a potential gas shortfall after Qatar Energy halted LNG production following Iran's attacks. On the other hand, Saudi Arabia assured Pakistan of secure oil supplies through the Port of Yanbu on the Red Sea to help meet energy needs. The government was also reviewing a proposal to shift to weekly revision of petroleum prices from fortnightly reviews, the JS head of research said.