The Pakistan Stock Exchange (PSX) witnessed a sharp sell-off on Monday, with the benchmark KSE-100 Index tumbling over 3% as escalating US-Iran tensions and the onset of the futures roll-over period severely dented investor sentiment.
Market in Freefall
The KSE-100 Index closed at 167,691.08 points, marking a significant loss of 5,478.63 points, or 3.16%, from the previous session’s close of 173,169.71. The trading session was highly volatile, with the index hitting an intraday high of 174,336.85 before plunging to a low of 166,886.63, down 6,283.08 points or 3.63% from the day’s peak.
Geopolitics and Market Mechanics Drive Sell-Off
Analysts attributed the steep decline to a confluence of external and internal factors. “The market remained under sustained pressure, as investors stayed wary of escalating geopolitical tensions between the United States and Iran, prompting cautious positioning,” said an expert from a leading securities firm.
The expert added, “The absence of any meaningful near-term trigger, coupled with the commencement of the roll-over period, further contributed to volatility, keeping the bias lower.” The roll-over week, where futures contracts are settled, typically increases market volatility.
Background: Rising US-Iran Tensions
The risk-off mood was fueled by heightened geopolitical rhetoric. Recent reports indicated that the US administration was considering military options, including potential strikes, amid stalled nuclear negotiations. Indirect talks between the two nations are ongoing but have yet to yield a breakthrough.
Economic Data Presents Mixed Picture
Amid the market turmoil, recent economic data offered a nuanced view:
- Foreign Outflows: Profit and dividend repatriation by foreign investors rose to $1.677 billion in the first seven months of FY26, up from $1.328 billion a year earlier. Analysts view this as a normalization of capital flows alongside improved reserves.
- Current Account: Pakistan posted a current account surplus of $121 million in January, supported by strong remittances. However, the cumulative deficit for 7MFY26 stood at $1.07 billion.
- Weekly Inflation: The Sensitive Price Indicator (SPI) recorded a 1.16% increase for the week ended February 19, with year-on-year inflation at 5.19%.
The sharp downturn follows a modest gain in the previous session, highlighting the current fragility of investor confidence in the face of global uncertainty and local market mechanics.
