Key Takeaways
- The KSE-100 Index dropped by 1,853.96 points or 1.08% at 9:48am on Friday.
- Key sectors such as automobile assemblers and commercial banks saw significant selling pressure.
- Geopolitical tensions between the US and Iran, coupled with rising oil prices, triggered widespread risk aversion.
Selling pressure intensified at the Pakistan Stock Exchange (PSX) on Friday morning, with the benchmark KSE-100 Index experiencing a significant drop. By 9:48am, the index had fallen by 1,853.96 points or 1.08%, to hover around 169,885.48.
The decline was widespread across various sectors, including automobile assemblers, cement companies, commercial banks, oil and gas exploration firms, OMCs (Oil Marketing Companies), and power generation companies. Index-heavy stocks such as HUBCO, ARL, MARI, OGDC, PPL, HBL, MCB, MEBL, and NBP were among those trading in the red.
The broader market sentiment was influenced by escalating tensions between the United States and Iran, which have intensified geopolitical risks. These tensions are also linked to a sharp rally in international crude oil prices, pushing Brent crude above $100 per barrel for the first time in two months. The conflict has seen attacks by Iran-aligned Houthis on Saudi tankers in the Red Sea, as well as Iranian threats against neighboring Arab countries hosting U.S. bases.
The situation has worsened since an interim truce failed to hold, with the United States launching air strikes on Iran and Tehran retaliating against Arab nations. This ongoing conflict has caused Brent crude prices to soar nearly 40% in just two weeks. The global oil market is now under significant pressure, affecting not only energy stocks but also broader financial markets.
The sell-off at PSX was part of a wider trend observed globally. Asian shares fell on Friday as oil prices surged above $100 per barrel amid the intensifying conflict in the Gulf. This triggered widespread risk aversion and heavy selling across key sectors, with MSCI’s broadest index of Asia-Pacific shares outside Japan dropping 1%, and South Korea’s KOSPI falling by 3.7%.
The impact on financial markets extended beyond oil prices. The U.S. administration announced plans to impose higher tariffs on goods from 60 trading partners, adding to inflation concerns. This led to a rise in bond yields, with 30-year Treasury yields nearing their highest levels since 2007 and European borrowing costs climbing to highs last seen in 2011.
Central banks are now expected to become more hawkish, with a one-in-three chance of a rate hike from the Federal Reserve as soon as next week. A September rate hike is already fully priced in by financial markets. The European Central Bank left rates unchanged but indicated that a September rate hike is about 70% likely.
The PSX’s performance reflects the broader market sentiment, with investors showing significant caution and selling pressure across multiple sectors. As geopolitical tensions continue to escalate, the impact on Pakistan’s stock market remains uncertain.
