PSX surges over 1,200 points on reports of Pakistan’s mediation efforts in Middle East conflict

Bulls returned strongly to the Pakistan Stock Exchange (PSX), with the benchmark KSE-100 Index surging over 1,200 points, driven by reports of Pakistan’s mediation efforts to de-escalate tensions in the Middle East, a five-day pause in the conflict announced by US President Donald Trump, and easing oil prices.

According to the PSX website, the market opened on a positive note, and the index touched the highest level of 157,442.68, gaining over 4,500 points. The market closed at 153,966.36, up by 1225.99, or 0.8% from the previous close. 

Market activity reflected broad-based buying across key sectors, indicating improved investor confidence. Gains were recorded in automobile assemblers, cement, commercial banks, oil and gas exploration companies, oil marketing companies and power generation. 

The upward rally followed reports that Pakistan is engaging in diplomatic efforts, alongside Egypt and Turkiye, to facilitate high-level talks in Islamabad aimed at easing tensions related to the US-Israel conflict with Iran.

Financial Times reported that Pakistan is positioning itself as the lead mediator trying to broker an end to the US’s and Israel’s war against Iran, using its military strongman’s ties to Tehran and warm relationship with Donald Trump.

"Two officials familiar with the discussions said Pakistan has pitched Islamabad as a possible venue for talks as early as this week involving senior figures from the Trump administration and Iran. Army chief Asim Munir spoke with Trump on Sunday, according to two people briefed on the call, while Pakistani Prime Minister Muhammad Shehbaz Sharif held talks with Iranian President Masoud Pezeshkian on Monday," wrote the British daily newspaper.

The conversation between the Pakistani and Iranian leaders came at around the same time as Trump announced that he was delaying his threat to “obliterate” Iran’s power plants after “very good and productive” conversations with Tehran to end the war.

On Monday, Trump wrote on his Truth Social platform that the U.S. and Iran had held "very good and productive" conversations about a "complete and total resolution of hostilities in the Middle East". As a result, he said, he was postponing for five days a plan to hit Iran's energy grid. 

Trump’s announcement sent share prices higher and oil prices sharply lower to below $100 a barrel, a sudden reversal to a market swoon caused by his weekend ​threats and Iran's vows to respond.

Pakistan’s equity market recovery comes after a prolonged downturn. The KSE-100 Index had declined for eight consecutive weeks, losing 1,126 points, or 0.73%, on a week-on-week basis to close at 152,740 points last week.

Globally, markets remained volatile amid developments in the Middle East. Oil prices rose in early trade on Tuesday on ​supply fears, as Iran denied it had held talks with the United States to end the war in ‌the Gulf, contradicting President Donald Trump, who said a deal could be reached soon. 

Brent futures rose $1.06, or 1.1%, to $101 a barrel at 0001 GMT, while U.S. West Texas Intermediate (WTI) climbed $1.58, or 1.8%, to $89.71.

Asian markets moved higher, with MSCI’s Asia-Pacific index excluding Japan rising 1%, Japan’s Nikkei gaining 0.8% and Hong Kong’s Hang Seng Index up 1.4%.

However, US and European futures indicated caution, with Nasdaq futures down 0.6%, S&P 500 futures lower by 0.5%, EUROSTOXX 50 futures declining 0.9% and FTSE futures easing 0.8%.