Pakistan Stock Market Shows Fragile Recovery After Sharp Crash on Geopolitical Concerns

After four consecutive sessions of decline, the Karachi Stock Exchange edged up slightly on Friday, recovering a few points from its recent losses. The KSE-100 index rose as much as 2.3% over its previous close, as market participants cautiously resumed trading after four sessions of substantial selling.

On Thursday, the index nosedived 7.6%, which necessitating a brief trading suspension, amid rising tensions between India and Pakistan. The market crashed after reports emerged of multiple drone attacks in major Pakistani urban centres. The KSE-100 index had lost over 9% during its four-day losing streak. However, showing some rebound today, the index is now down over 7% from the May 2 close.

Tensions between India and Pakistan have escalated following a retaliatory strike by the Indian Armed Forces in response to a terror attack on civilians in Pahalgam, that claimed 26 lives. India carried out targeted military strikes, under Operation Sindoor, at nine locations in Pakistan and Pakistan-occupied Kashmir early Wednesday, describing the action as “precise and restrained”.

Back home, the Indian equities market witnessed a setback after remaining resilient over the past few sessions. As of 12:58 pm, both the Nifty 50 and BSE Sensex were down over 1%.

Pakistan launched a series of missile and drone attacks on Indian border cities on Thursday. However, Indian armed forces swiftly and effectively neutralised the offensive and as a precautionary measure, blackouts were enforced in several areas to minimise potential damage and ensure civilian safety.

Meanwhile, Pakistan said that its ministry of economic affairs social media account on X was hacked and an appeal was posted asking for more international loans to meet the “heavy losses" caused by the current tensions with India. The International Monetary Fund board is scheduled to meet on Friday in Washington to review the financial assistance provided to Pakistan, but the proposal is expected to face strong resistance from India.