KSE-100 sheds 2.7% WoW as Middle East tensions cloud outlook: report

The Pakistan Stock Exchange (PSX) benchmark KSE-100 Index fell 4,782 points, or 2.7%, week-on-week to close at 171,021.20 points on Friday, while the trajectory of the US-Iran conflict and international oil prices, along with the Monetary Policy Committee's July 27, 2026 announcement on the policy rate, are expected to remain the key focus for the market in the coming week, according to two research firms.

The benchmark Index remained under pressure amid persistent geopolitical uncertainty, and the average daily traded volume (ADTV) declined 3.2% week-on-week to 881.4 million shares.

Other PSX indices also ended lower: the KSE-30 fell 2.9% to 50,952 points, the KMI-30 dropped 2.7% to 240,634 points, and the KSE-All Share Index declined 2.6% to 103,836 points. Market capitalisation fell to Rs19,278 billion (US$69.38 billion) from Rs19,790 billion (US$71.20 billion) a week earlier.

The weekly sell-off was driven by a widening US-Iran conflict that threatened a second global energy chokepoint. Yemen's Houthis declared a naval blockade on Saudi Arabia. They claimed strikes on two Saudi oil tankers in the Red Sea, raising the risk of disruption to Bab el-Mandeb flows in addition to existing tensions at the Strait of Hormuz. At the same time, the US carried out a twelfth consecutive night of strikes on Iranian military targets. Brent crude peaked above $101 per barrel before easing to $97 per barrel.

Sentiment found some support from S&P Global Ratings' upgrade of Pakistan's long-term sovereign credit rating to 'B' from 'B-' with a stable outlook, citing ongoing IMF-backed reforms, improved fiscal performance, stronger institutions, and higher foreign exchange reserves.

Sectors and flows

On the sectoral front, banking sector deposits rose 15.2% year-on-year to Rs40.9 trillion in June 2026, while advances increased 13.0% YoY to Rs15.3 trillion. The advances-to-deposits ratio (ADR) stood at 37.4%, down 74 basis points YoY and 173bps month-on-month, while the investment-to-deposit ratio (IDR) came in at 104.2%.

Urea offtake rose 2% YoY to 592,000 tons, driven by improving farm economics and the availability of subsidies and cheaper financing, while DAP sales fell 58% YoY on higher pricing. Gas production declined 1.7% week-on-week to 3,005 mmcfd, largely due to lower output from Uch, Kandhkot and Shewa fields, while oil production fell 0.3% WoW to 71,344 barrels per day.

At the sector level, Refinery, Insurance, and Textile Spinning were the top contributors on the main board, rising 5.5%, 2.5% and 1.1% week-on-week, respectively. Jute, Sugar & Allied Industries, and Close-end Mutual Fund sectors lagged, falling 10.9%, 8.0% and 6.6%, respectively. 

AHL's data showed Banks were the biggest drag on the index, shaving off 1,369.56 points, followed by Fertilizer (-695.96 points), Exploration & Production companies (-585.32 points), Cement (-574.56 points), and Investment Banks (-275.18 points). On the positive side, Refinery added 52.49 points, followed by Insurance, Real Estate, Textile Weaving, and Paper & Board.

In terms of scrip-wise contribution, United Bank Limited (UBL), Fauji Fertilizer Company (FFC), Habib Bank Limited (HBL), Engro Holdings (ENGROH), and Pakistan Petroleum Limited (PPL) were the biggest negative contributors, while Attock Refinery Limited (ATRL), Cnergyico PK Limited (CNERGY), Nestle Pakistan, Ghani Global Holdings (GHNI), and Adamjee Insurance (AICL) contributed positively.

Foreign investor participation showed mixed trends during the week. According to AKD's FIPI flow data, foreign investors were net buyers on most days, before turning net sellers of $0.4 million on July 24. On the local side, major net selling was recorded by Mutual Funds and Banks/DFIs, at $17.4 million and $13.6 million respectively, while Individuals and Insurance companies were the largest net buyers, at $15.3 million and $4.3 million respectively.

Average trading volumes fell 6% week-on-week to 696 million shares, while average traded value declined 19% WoW to $99.8 million, according to AHL. Volume leaders included Cnergyico PK Limited (CNERGY) with an average volume of 129.8 million shares, followed by TPL Trakker (TPLP), Treet Corporation (TSBL), Pakistan Refinery Limited (PRL), and WorldCall Telecom (WTL).

Top gainers and losers

Among individual stocks, the top performers for the week were Young's Wear Limited (YOUW), up 8.9%; Cnergyico PK Limited (CNERGY), up 4.9%; Pakistan Aluminium Beverage Cans Limited (PGLC), up 4.3%; Attock Refinery Limited (ATRL), up 2.2%; and Nestle Pakistan, up 1.8%.

The top laggards were Sui Southern Gas Company (SSGC), down 14.1%; Sui Northern Gas Pipelines Limited (SNGP), down 8.6%; Kohinoor Textile Mills (KTML), down 8.2%; Maple Leaf Cement Factory (MLCF), down 7.7%; and Kohat Cement Company (KOHC), down 7.5%.

Other developments

Additional major developments during the week included Pakistan seeking a $10 billion bilateral exchange stabilisation facility from the United States, the government proposing changes to the Brownfield Refining Policy 2023, and Pakistan purchasing a spot LNG cargo at $21.88/mmbtu, the highest level since March 2026, according to AKD. 

The US also unveiled new tariffs on 60 trade partners ranging from 10% to 12%, with Pakistan facing a 10% tariff.

Pakistan's rupee remained largely stable against the US dollar, strengthening 0.03% week-on-week to close at Rs277.87/USD.

Outlook

AHL said market direction is expected to remain dependent on geopolitical developments and corporate earnings announcements, while noting that the SBP is likely to maintain the policy rate at 11.5% as it assesses evolving external risks and their impact on inflation before considering its next policy move. 

The brokerage said the KSE-100 Index is currently trading at a P/E of 7.9x, offering a dividend yield of 6.4%.

AKD said favourable financial results for June 2026 would support market sentiment in the near term. The brokerage said the market continues to trade at attractive valuations, with a current P/E of 7.8x, and forecast the KSE-100 Index to reach 263,800 points by December 2026.