Pakistan Stock Exchange Plummets Over 6,500 Points as India-Pakistan Tensions Escalate

The Pakistan Stock Exchange (PSX) experienced one of its worst single-day declines in recent history on Wednesday, with the benchmark KSE-100 Index plummeting 6,560.82 points, or 5.78%, to 107,007.68 by 9:30 AM. The dramatic fall was triggered by escalating geopolitical tensions between Pakistan and India, marking the most severe military confrontation between the nuclear-armed neighbors in over two decades.

The market’s nosedive followed overnight hostilities along the Line of Control (LoC), where Indian missile strikes targeted six locations in Pakistan, including Bahawalpur, Kotli, and Muzaffarabad, according to Lieutenant General Ahmed Sharif Chaudhry, Director General of Inter-Services Public Relations (DG ISPR). The strikes resulted in the deaths of at least eight Pakistani civilians and injured 35 others, prompting a swift retaliation from Pakistan’s military. Defence Minister Khawaja Asif confirmed that the Pakistan Air Force (PAF) shot down five Indian Air Force (IAF) jets, including three Rafales, one MiG-29, and one Su-30, in response to what Pakistan called “unprovoked aggression.”

The military escalation, dubbed “Operation Sindoor” by India, was linked to a deadly attack on April 22, 2025, in Pahalgam, Indian-administered Kashmir, where 26 tourists were killed. India accused Pakistan of supporting the attackers, a claim Islamabad denied, leading to a series of diplomatic and military measures, including India’s suspension of the Indus Waters Treaty and Pakistan’s closure of airspace to Indian airlines.

The PSX saw widespread panic selling across major sectors, including commercial banks, oil and gas exploration, oil marketing companies, power generation, and refineries. Index-heavy stocks like OGDC, PPL, POL, HUBCO, SNGPL, and SSGC traded deep in the red, reflecting investor fears of prolonged conflict. “The market’s reaction is driven by geopolitical uncertainty rather than economic fundamentals,” said a senior equity analyst at a Karachi-based brokerage. “If tensions persist, we expect further volatility.”

The KSE-100 had already shown signs of nervousness on Tuesday, closing 534 points lower at 113,568.51 after a volatile session. Wednesday’s crash wiped out over Rs427 billion in market capitalization, with trading briefly halted to curb the freefall.

International reactions have been limited but notable. U.S. President Donald Trump called India’s strikes “a shame” but offered no immediate mediation, while UN Secretary-General António Guterres urged both sides to exercise restraint, warning that “the world cannot afford a military confrontation between India and Pakistan.” Global markets, however, remained largely insulated, with S&P 500 futures up 0.9% and Hong Kong’s Hang Seng gaining 1.7%, buoyed by China’s economic stimulus measures, including a 10 basis point interest rate cut and reduced bank reserve requirements.

As Pakistan braces for potential further escalation, market analysts predict continued volatility. “Investors are in a wait-and-watch mode,” said a Karachi-based trader. “The next few days will be critical for both the PSX and the broader region.” With diplomatic channels strained and military posturing intensifying, the economic fallout from the India-Pakistan standoff is likely to deepen unless de-escalation efforts gain traction.