PSX extends losses as SBP rate hike, geopolitical tensions weigh on sentiment

The Pakistan Stock Exchange (PSX) remained under pressure on Tuesday as investor sentiment weakened following the State Bank of Pakistan’s interest rate hike and escalating geopolitical tensions, with efforts to end the US-Iran conflict stalled and the Strait of Hormuz largely restricted. 

According to the PSX website, the market opened on a bearish note, with the KSE-100 dropping nearly 1,300 points to an intraday low of 168,170.74 shortly after the open. As the session progressed, the index traded within a range of 168,170.74 to 169,313.90.

At the end of the session, the market closed at 168,412.23, down 1085.12 points or 0.64% from the previous close. 

Losses were recorded in key sectors, including oil and gas exploration companies, oil marketing companies, power generation, automobile assemblers, cement and fertiliser. Index-heavy stocks such as HUBCO, MARI, OGDC, PPL, POL, LUCK and DGKC traded lower.

The decline follows the central bank’s move to increase the policy rate by 100 basis points to 11.50%, which has led to cautious trading as the market adjusts to the higher interest rate environment. The SBP hiked the interest rate after nearly three years, as mounting geopolitical tensions and rising global energy prices fuel inflation concerns. 

In its policy statement, the MPC warned that the current supply shock could push inflation into double digits in the coming months before gradually easing. However, inflation is expected to remain above the upper bound of the 5–7% target range for most of FY27.

The MPC said that the prolonged Middle East war has intensified risks to Pakistan’s macroeconomic outlook. It noted that global energy prices, freight charges, and insurance premiums remain significantly above pre-conflict levels, while ongoing supply chain disruptions continue to add to uncertainty.

On Monday, the KSE-100 Index had closed at 169,497.36 points, down 1,174.68 points or 0.69%, ahead of the monetary policy announcement.

Globally, stocks held ​their ground and oil rose on Tuesday as investors weighed the stalemate in the Iran conflict, while the yen ‌was steady after a hawkish split at the Bank of Japan underlined fears over the war's impact on inflation.

The U.S. was reviewing Tehran's latest proposal to resolve the war, even as a U.S. official said President Donald Trump was unhappy with the plan as it did not address Iran's nuclear programme.

That leaves the ​two-month-long conflict at an impasse, with energy and other supplies through the critical Strait of Hormuz still mainly shut, pushing ​oil prices above $110 a barrel on Tuesday.

Brent crude oil surged 2.7% to $111.20 a barrel, a three-week high, ⁠while U.S. oil climbed 2.9% to $99.10.

Futures for the U.S. benchmark S&P 500 stock index slipped 0.1% and those for ​tech-focused Nasdaq fell 0.4%.

European stocks dipped in early trading but the STOXX 600 index was last flat.

The BOJ left short-term rates unchanged on Tuesday at 0.75%, in the first of several central bank meetings this week that could shed light on the impact ​of the conflict.