Stock market slips 1.6% on Hormuz uncertainty

Pakistan Stock Exchange (PSX) closed the week on a softer note, with the benchmark KSE-100 index settling at 177,167, down 2,938 points, or 1.63% week-on-week, amid lingering uncertainty about the US-Iran conflict and domestic political noise.

After a volatile stretch that saw the index lose ground in most sessions, the market staged a recovery on Friday, gaining 575 points (+0.33%) to close at 177,167. Earlier in the week, the index had slipped to as low as the 176,500-176,800 range before the late rebound.

On a day-on-day basis, the PSX commenced the trading week with a positive session on Monday. The KSE-100 rose 398 points (+0.22%) to close at 180,502. However, the market witnessed a negative session the following day, when the index declined 2,547 points (-1.41%) to 177,956.

PSX continued the negative trend next day as well, dropping 1,109 points (-0.62%) to close at 176,846. The KSE-100 ended Thursday's session in the red again at 176,591, down 254 points (-0.14%), extending the recent cautious tone.

PSX snapped the losing streak on the last trading day, Friday, where the index gained 575 points (+0.33%) to settle at 177,167.

Arif Habib Limited (AHL), in its weekly review, noted that the KSE-100 index closed down 1.63% week-on-week (-2,938 points) amid continued uncertainty over the US-Iran conflict, alongside domestic political noise.

Among major economic data, the current account deficit narrowed to $328 million in Jul'26 compared with a deficit of $529 million in Jul'25, representing a 38% decrease. On a month-on-month basis, the deficit narrowed by 59.7% from $814 million in Jun'26.

The large-scale manufacturing (LSM) output fell by 3.5% year-on-year in Jun'26, while the decline was 6.1% MoM. However, in the entire FY26, the LSM index grew by 5% YoY.

Additionally, Pakistan recorded a net foreign direct investment (FDI) inflow of $179 million in Jul'26, up from $49 million in Jun'26, reflecting a 265% MoM increase. Technology exports accelerated 18% YoY to $417 million in Jul'26, accounting for 45% of total services exports.

Auto financing increased by 35.2% YoY to Rs386 billion in Jul'26, compared with Rs286 billion in Jul'25. On a MoM basis, auto financing rose by 1.2%.

Power generation increased by 7% YoY to 15,122 GWh in Jul'26, marking the second-highest generation recorded in any July, supported by record-high hydel, local coal and imported coal-based generation. Oil production edged down by 0.5% WoW to 67.8k barrels per day, primarily due to lower flows from Nashpa, while gas production inched higher by 1.9% WoW to 2,995 million cubic feet per day (mmcfd), driven by the revival of Uch gas production.

Also, the government raised Rs517.9 billion in T-bill auction, exceeding the Rs500 billion target. Cut-off yields increased across all tenors, with the majority of the amount, Rs349.5 billion, raised through the three-month paper. During the week, the Pakistani rupee appreciated slightly against the US dollar, strengthening 0.03% to close at Rs277.56/$.

"Going forward, market direction is likely to remain sensitive to geopolitical developments, while the ongoing earnings season is expected to provide support to the overall market performance," AHL said.

Wadee Zaman of JS Global observed that the KSE-100 lost ground during the week, closing at 177,167, down 2,938 points (1.6% WoW), amid heightened political and regional tensions. The uncertainty surrounding the Strait of Hormuz drove Brent crude prices up by 8% WoW to $94 per barrel.

Domestically, petrol prices rose by Rs12.35 during the week to Rs337.78/litre, while high-speed diesel prices fell by Rs19.25 to Rs364.70/litre after the government capped the diesel crack spread at $41.5/barrel versus the international margin of $68/barrel, which led to a Rs32.63/litre reduction in diesel prices.

In another key development, the Petroleum Division submitted a Rs1.49 trillion gas-sector circular debt settlement plan to the Cabinet Committee on Energy, against total circular debt of Rs3.6 trillion. For debt mitigation, the key measures include Rs540 billion in dividends from OGDC, PPL and GHPL, a Rs5/litre additional petroleum levy, and savings from reduced LNG cargoes.