The Pakistan Stock Exchange (PSX) staged a blistering rally on Monday, as a confluence of global and domestic tailwinds—headlined by a breakthrough peace deal between the United States and Iran—sent the benchmark index soaring. The KSE-100 Index rocketed to an intraday high of 176,917.76, marking a staggering gain of 4,517.86 points, or 2.62%, as investor sentiment underwent a dramatic reversal.
The session’s low touched 175,085.79, still reflecting a robust increase of 2,685.89 points from the previous close of 172,399.90. The surge was powered by a broad-based buying spree, erasing fears of imminent monetary tightening that had gripped the market in recent weeks.
Peace Dividend and Oil Collapse Unleash Bullish Frenzy
The primary catalyst for the global risk-on mood was the confirmation that the US and Iran had agreed to end their three-month conflict and reopen the Strait of Hormuz. The deal, mediated by Pakistan, is set to be formalized in Switzerland on June 19. The announcement immediately deflated a major geopolitical risk premium.
“A budget that has directionally changed from consolidation to growth, along with the solution to the Iran-US conflict, has buoyed sentiment,” said Ahfaz Mustafa, CEO of Ismail Iqbal Securities. “It has also tamed expectations of a rate hike and triggered buying across all sectors, especially construction.”
US President Donald Trump declared the Strait of Hormuz would be opened “toll free,” ending a naval blockade, while Iran’s Deputy Foreign Minister Kazem Gharibabadi confirmed an “immediate end” to the war. The news sent crude prices into a tailspin, with West Texas Intermediate approaching $80 a barrel and Brent crude falling more than 4% to around $83.60. This sharp decline directly soothed anxieties that renewed inflationary pressure would force central banks into fresh interest rate hikes.
Growth-Tilted Budget Adds Fuel to the Rally
On the domestic front, the bullish momentum was reinforced by the federal budget for FY27, unveiled by Finance Minister Muhammad Aurangzeb. Analysts characterized the budget as a pivot from fiscal consolidation to growth, targeting a GDP expansion of 4%. The budget projects a fiscal deficit of 3.6% of GDP, supported by provincial contributions and a 17.6% growth in tax revenues.
AKD Research assessed the budget as broadly positive for the market, highlighting the abolition of the Super Tax for companies with profitability below Rs500 million. For firms exceeding that threshold, the Super Tax rate has been reduced by 2%, a measure expected to benefit approximately 67% of PSX-listed companies. Key sectors, including exporters, cement, and refineries, received targeted relief through reductions in advance tax, the abolition of the Export Development Surcharge, and the removal of GST on machinery imports for refinery upgradation.
Rate Hike Fears Dissipate Ahead of Policy Review
The dramatic shift in the macroeconomic landscape has recalibrated expectations for monetary policy. The State Bank of Pakistan’s Monetary Policy Committee is scheduled to meet today for its final review of FY26. The only rate hike of the current fiscal year occurred in April, when the benchmark rate was raised by 100 basis points to 11.5%. Market participants now widely believe the combination of cooling oil prices and a pro-growth budget has significantly reduced the likelihood of further tightening.
The PSX had already posted strong gains on Friday, with the KSE-100 climbing 1.59%. Last week, the index advanced by 1,921 points, or 1.13%, setting the stage for Monday’s explosive breakout as the full weight of the geopolitical breakthrough sank in.
