Escalating geopolitical tensions following the US bombing of Iran’s nuclear sites have shaken investor confidence and driven selling pressure at the Pakistan Stock Exchange (PSX), with the benchmark KSE-100 Index plunging more than 3,500 points or 3% during the intraday trading.
According to the PSX website, the market opened on a cautious note, with the KSE-100 losing 2,036.88 points during the early minutes of trading, dropping to 11,986.35 from the previous close of 12,023.23 points.Â
Selling pressure was observed across various sectors, particularly in oil and gas, automobile assemblers, OMCs, power generation, and commercial banks. Key index-heavy stocks such as OGDC, PPL, POL, HUBCO, and PSO saw losses.
At 02:55 pm, the market was hovering at 116,422.36 level, a decrease of 3600.87 points or 3%.Â
The previous week had also been challenging for the PSX, as rising geopolitical tensions, fluctuating international commodity prices, and mixed domestic economic indicators dampened investor sentiment.
On a week-on-week basis, the KSE-100 Index ended at 120,023.23 points, reflecting a 1.7% decline from the previous week’s closing of 122,143.57 points.
In a related development, shares slipped in Asia on Monday and oil prices briefly hit five-month highs as investors anxiously waited to see if Iran would retaliate against U.S. attacks on its nuclear sites, with resulting risks to global activity and inflation.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5, and Japan’s Nikkei eased 0.9%. EUROSTOXX 50 futures lost 0.7%, while FTSE futures fell 0.5% and DAX futures slipped 0.7%. Europe and Japan are heavily reliant on imported oil and LNG, whereas the United States is a net exporter.
Early moves were contained, with the dollar getting only a minor safe-haven bid and no sign of panic selling across markets.Â
Optimists were hoping Iran might back down now that its nuclear ambitions had been curtailed, or even that regime change might bring a less hostile government to power there.
The dollar edged up 0.3% on the Japanese yen to 146.48 yen, while the euro dipped 0.3% to $1.1481. The dollar index firmed 0.17% to 99.078. There was also no sign of a rush to the traditional safety of Treasuries, with 10-year yields rising 2 basis points to 4.397%.
Analysts at JPMorgan, however, cautioned that past episodes of regime change in the region typically resulted in oil prices spiking by as much as 76% and averaging a 30% rise over time.
Key will be accessed through the Strait of Hormuz, which is only about 33 km (21 miles) wide at its narrowest point and sees around a quarter of global oil trade and 20% of liquefied natural gas supplies.
Oil prices jumped to their highest since January as the United States’ weekend move to join Israel in attacking Iran’s nuclear facilities stoked supply worries. Brent crude futures was up $1.92 or 2.49% at $78.93 a barrel as of 0117 GMT. U.S. West Texas Intermediate crude advanced $1.89 or 2.56% to $75.73.
Both contracts jumped by more than 3% earlier in the session to $81.40 and $78.40, respectively, touching five-month highs before giving up some gains.
Iran is OPEC’s third-largest crude producer.Â
Market participants expect further price gains amid mounting fears that an Iranian retaliation may include a closure of the Strait of Hormuz, through which roughly a fifth of global crude supply flows.
