PSX falls as renewed US-Iran tensions shake investor sentiment

The Pakistan Stock Exchange (PSX) lost momentum on Friday as renewed escalation between the United States and Iran rattled investor sentiment and weakened hopes of ending the conflict and reopening the Strait of Hormuz, triggering broad-based selling. 

According to the PSX website, the market opened in negative territory, with the KSE-100 plunging by more than 2,400 points shortly after trading began. Although the market later recovered part of the losses, overall sentiment remained bearish throughout the session.

Selling was seen in key sectors including oil & gas exploration companies, automobile assemblers, automobile parts & accessories, commercial banks, pharmaceuticals and oil & gas marketing companies. 

At close, the KSE-100 settled at 171,115.82, down by 1778.45 points, or 1.03% from the previous close.

Market analysts attributed Friday’s decline to the latest regional developments, as US and Iranian forces clashed in the Gulf, and the UAE came under renewed attack, endangering a month-old ceasefire and ‌shaking hopes for a diplomatic solution to the crisis.

The flare-up in fighting came as Washington awaited a response from Tehran to its proposal to end the war. 

President Donald Trump said on Thursday three U.S. Navy destroyers were attacked as they moved through the strait, a conduit for around a fifth of the world's oil ​and liquefied natural gas flows that Iran has all but closed since the conflict started.

Trump later told reporters the ceasefire was still in effect and sought to play down the exchange.

On Thursday, the benchmark KSE-100 Index gained 1,189.52 points or 0.69% to close at 172,894.28 points, although profit-taking during mid-session erased part of the day’s earlier gains.

Globally, oil prices rose and stocks slipped as the U.S. and Iran exchanged fire in the Middle East, though many equity markets, ​particularly in Asia, were headed for stellar weekly gains on booming AI demand.

Benchmark Brent crude futures were up about 1% to $101 a ‌barrel, while European stocks fell 0.9%.

Traders were also keeping an eye on Labour Party losses in British elections, which could pressure Prime Minister Keir Starmer's leadership, though sterling inched up, and British bonds and stocks traded in line with European peers as results were coming in.

Stock markets in Europe ​were lower. The pan-continental STOXX 600 was down 0.9%, while major bourses in Frankfurt and Paris were off a similar amount.

Stock markets in Asia, which have been soaring ​thanks to strong revenue and spending plans from the U.S. AI hyperscalers - which will benefit the region's chipmakers - slipped slightly from record highs.

MSCI's broadest index of Asian shares outside Japan fell 1%, although South Korea's KOSPI inched up 0.1%, for a weekly gain of more than 13.5% - the largest since 2008 - on the back of a surge in Samsung and SK Hynix.

Taiwan's benchmark was up 7% ​this week and Japan's Nikkei rose 5.4%. The European benchmark was heading for a 0.1% weekly fall.

Currency markets were broadly steady with the dollar falling ​slightly and heading for its second straight weekly loss, although the yen remained in focus. 

Gold rose on Friday and was ‌headed for a weekly gain on easing fears of inflation and higher interest rates, as investors remained optimistic about a U.S.-Iran peace deal despite renewed hostilities.

Spot gold was up 0.85% at $4,709.06 per ounce, ​as of 0739 GMT. Bullion has gained 2% so far this week. ​U.S. gold futures for June delivery rose 0.1% to $4,716.50.