The Pakistan Stock Exchange (PSX) continued its powerful rally on Tuesday, with the benchmark index surging nearly two percent at its peak, as a confluence of positive developments—including a steady monetary policy, slumping global oil prices, and a breakthrough US-Iran peace agreement—fueled a wave of investor optimism.
During the session, the KSE-100 Index soared to an intraday high of 180,499.96, marking a gain of 3,460.14 points, or 1.95%. The index later pared some gains to a low of 177,741.46, still reflecting a solid increase of 701.64 points, or 0.4%, from the previous close.
Monetary Policy Calm Fuels Bullish Sentiment
The rally was catalyzed by the State Bank of Pakistan’s (SBP) decision to maintain its key interest rate at 11.5%, a move that analysts say removed a layer of uncertainty from the market. The central bank, in its Monday meeting, assessed the evolving impact of the Middle East conflict on domestic inflation and growth trajectories.
“Stocks trading bullish after SBP status quo in the policy announcement yesterday, owing to expected low inflation and US-Iran interim peace deal,” said Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities. “The slump in global crude prices and surging global equities played a catalyst role in bullish activity at the PSX.”
The Monetary Policy Committee (MPC) acknowledged that while headline inflation had spiked to 11.7% in May, driven by higher energy costs, the recent easing of geopolitical tensions was a critical factor. “The committee noted that global oil prices have eased following the recent positive geopolitical developments, yet they remain elevated as compared to pre-conflict levels,” the SBP stated. The MPC projects inflation to remain in double digits for the coming months before gradually easing, subject to risks from global price pass-through and fiscal adjustments.
Oil Plunge and Peace Deal Reshape Market Landscape
The most dramatic shift in sentiment came from the international arena. Global equities rose and oil prices extended their losses following a preliminary US-Iran peace deal, which is expected to reopen the strategically vital Strait of Hormuz. Brent crude futures fell to $82.92 a barrel, while US West Texas Intermediate slipped to $80.66, after a nearly 5% plunge on Monday.
Investors are now closely watching Friday’s signing ceremony in Switzerland, which aims to end a three-month conflict that had roiled energy markets and pushed global inflation higher. The preliminary deal includes a 60-day ceasefire and the reopening of the blockaded strait, though Iranian President Masoud Pezeshkian cautioned that a final agreement for a lasting truce “has yet to take shape.”
Investor-Friendly Budget and Reserve Confidence Add Support
Domestic policy moves also bolstered the market. The Pakistan Stock Brokers Association (PSBA) lauded the FY27 budget as a “balanced and investor-friendly package,” specifically praising the government’s decision to retain the existing tax regime for the stock market without imposing new levies. The association argued that a stable taxation framework is essential for attracting both domestic and foreign investment and reinforcing market stability.
Further underpinning confidence, the SBP Governor Jameel Ahmad expressed certainty in meeting the $18 billion foreign exchange reserve target for the fiscal year, with remittances expected to exceed $41 billion. He noted that most debt repayments for FY26 have been managed, with only $700 million due in the immediate term.
Tuesday’s gains build on Monday’s explosive session, when the KSE-100 Index skyrocketed by 4,639.92 points, or 2.69%, to close at 177,039.82, marking a powerful continuation of the market’s winning streak.
