The Karachi Interbank Offered Rate (KIBOR) declined across all tenors on Wednesday, reflecting improved investor sentiment after a diplomatic breakthrough in the Middle East eased regional tensions.
The benchmark three-month KIBOR fell by 26 basis points to 11.42%, marking the steepest drop among short-term tenors. The six-month rate declined by 18 basis points to 11.61%, while the one-year rate dropped 16 basis points to 12%.
Market participants attributed the decline to a reduction in the so-called “war premium” that had recently pressured Pakistan’s lending environment, signaling expectations of greater regional stability.
The positive momentum extended to equities, where the Pakistan Stock Exchange saw a sharp rally. The benchmark KSE-100 index surged by 12,920.93 points at the opening, registering an 8.52% gain in what traders described as a historic session.
Analysts linked the dual-market rally to reports that U.S. President Donald Trump had postponed a planned military strike on Iran for two weeks to allow time for diplomatic negotiations.
The de-escalation effort is aimed at securing a broader ceasefire and reopening the strategically vital Strait of Hormuz, a key global energy route whose disruption had raised economic concerns worldwide.
Prime Minister Shehbaz Sharif said Pakistan has taken on a mediating role in the crisis, inviting senior delegations from the United States and Iran for talks in Islamabad.
Sharif said the initiative contributed to an immediate ceasefire understanding between the parties and expressed optimism that upcoming discussions — dubbed the “Islamabad Talks” — could pave the way for a lasting peace agreement and further stabilize Pakistan’s economy.
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