The Pakistan Stock Exchange (PSX) kicked off the new trading week with a powerful rally, as the benchmark KSE-100 Index surged by more than 5,000 points during early trading on Monday. The sharp rise reflected renewed investor confidence following easing geopolitical tensions in the Middle East, declining international oil prices, and growing expectations that the State Bank of Pakistan (SBP) would maintain its current monetary policy stance.
The market opened on a highly positive note, extending gains shortly after trading began. By 9:50 a.m., the KSE-100 Index had climbed 4,501.33 points, reaching 175,522.53 points, compared to its previous closing level of 171,021.20 points.
The bullish momentum continued throughout the morning session. By 10:30 a.m., the benchmark index had gained 5,068.88 points, touching 176,090.08 points, making it one of the strongest intraday performances witnessed in recent months.
Market analysts attributed the rally primarily to improving global sentiment following a pause in military hostilities between the United States and Iran. The temporary halt in military strikes has eased fears of a wider regional conflict, particularly around the strategically important Strait of Hormuz, through which a significant portion of the world’s oil supply passes.
The reduced geopolitical risk immediately improved investor confidence across global financial markets, including Pakistan, where investors had remained cautious in recent weeks due to uncertainty surrounding the Middle East crisis.
Awais Ashraf, Director of Research at AKD Securities, said investor sentiment strengthened considerably after signs emerged that diplomatic efforts could replace military confrontation between Washington and Tehran.
According to him, hopes for renewed negotiations and the possible resumption of normal shipping activity through the Strait of Hormuz have reduced concerns about disruptions in global energy supplies and higher inflationary pressures.
Ashraf also noted that the easing tensions have increased expectations that the State Bank of Pakistan will leave its benchmark policy rate unchanged during the latest Monetary Policy Committee (MPC) meeting.
He explained that the central bank is likely to adopt a cautious approach while closely monitoring developments in the Middle East and assessing the economic impact of recent flood-related damages within Pakistan before making any changes to monetary policy.
Despite expecting no immediate rate cut, Ashraf said several economic indicators continue to support the possibility of monetary easing in the coming months.
He pointed to Pakistan’s ongoing disinflationary trend, a relatively comfortable external account position, weakening leading economic indicators, and contraction in money supply as factors that strengthen the case for future reductions in interest rates once uncertainty subsides.
Financial analysts at Mettis Global also linked the strong market performance to easing geopolitical tensions and a sharp decline in international oil prices.
Lower crude oil prices are generally viewed as positive for Pakistan because the country imports a significant portion of its energy requirements. Falling oil prices help reduce the import bill, ease pressure on foreign exchange reserves, improve inflation prospects, and strengthen the overall macroeconomic outlook.
Global oil markets reacted positively after reports suggested that both the United States and Iran had refrained from further military action. US President Donald Trump’s envoy to the United Nations indicated that Washington was allowing diplomatic efforts to continue, providing financial markets with greater confidence.
International crude oil prices recorded significant declines during Monday’s trading session. The price of Brent crude, the global benchmark, fell by more than 7%, briefly dropping below $90 per barrel. Meanwhile, West Texas Intermediate (WTI) crude also declined sharply, trading around $85.45 per barrel.
The decline in energy prices provided additional support to equity markets, particularly in energy-importing countries like Pakistan, where lower oil costs are expected to reduce inflationary pressures and improve the country’s external balance.
The strong rally also marks a sharp reversal from last week’s market performance. During the previous trading week, the PSX remained under considerable pressure as escalating tensions between the United States and Iran triggered widespread investor caution.
The benchmark KSE-100 Index had declined by nearly 2.7% over the week, losing approximately 4,782 points before closing at 171,021.20 points.
At that time, rising international oil prices and fears of prolonged regional instability overshadowed several positive domestic developments, including Pakistan’s recent sovereign credit rating upgrade.
Monday’s impressive recovery suggests that investors are once again focusing on improving macroeconomic fundamentals, easing inflation, stable external accounts, and expectations of supportive monetary policy.
While analysts continue to caution that geopolitical developments remain unpredictable, the latest rally demonstrates renewed optimism among investors that Pakistan’s financial markets could regain upward momentum if regional stability continues and economic indicators remain supportive in the weeks ahead.
