Pakistan stock market braces for volatile week on Iran tensions

Pakistan's stock market is expected to stay under pressure this week as investors weigh the escalating US-Iran conflict, higher global oil prices, rising domestic fuel costs and the start of June-quarter corporate earnings, analysts said.

The KSE-100 index has already posted its second straight weekly decline amid the regional tensions.

Why is the Pakistan stock market going down?

The KSE-100 fell 3.5% over the week as heightened Middle East tensions weighed on investor sentiment and curbed trading activity. Continued US strikes on Iran and fears of shipping disruptions through the Strait of Hormuz drove the decline. Analysts said valuations remain attractive despite the sell-off, pointing to scope for recovery once tensions ease.

How much did the KSE-100 index fall this week?

The index shed 6,439 points to close at 175,803, trading between a high of 181,148 and a low of 173,349. It finished lower in three of the five trading sessions. Average daily trading volumes fell about 31% from the previous week, reflecting investors' cautious stance amid the uncertainty.

How are oil prices affecting Pakistan's market?

Analysts attributed much of the weakness to the latest escalation in the US-Iran conflict, including continued US strikes and concerns over disruptions to the Strait of Hormuz, a vital route for global oil supplies. International oil prices rose sharply as a result, with Arab Light crude gaining about 10% during the week. Some analysts estimated broader benchmark prices climbed as much as 14%.

The government's decision to raise domestic petrol prices against this backdrop of rising global oil costs is also expected to weigh on investor confidence in the days ahead. Despite the overall decline, the market rebounded in two sessions as bargain hunters returned after heavy selling earlier in the week.

Who was buying and selling in Pakistan's stock market?

Mutual funds were the largest net sellers, with outflows of about USD37.6 million, followed by brokers at USD3.6 million. Foreign corporates were the biggest net buyers, purchasing shares worth about USD15.5 million, while individual investors recorded net buying of USD13.7 million. Banks, exploration and production companies, cement producers and fertiliser firms accounted for the largest drag on the benchmark index.

Is it a good time to invest in the Pakistan stock market?

Analysts said geopolitical developments will remain the main driver of market direction in the near term. Any signs of de-escalation in the US-Iran conflict, or renewed diplomatic progress paired with a retreat in global oil prices, could support equities. Investors will also watch the June-quarter earnings season, which is expected to shape stock-specific performance and broader sentiment.

Despite the recent sell-off, analysts said Pakistani equities continue to trade at attractive valuations. The KSE-100 is estimated to trade at a forward price-to-earnings ratio of 7.6 to 8.1 times, with an estimated dividend yield of 6.3%. This suggests room for recovery if geopolitical tensions begin to ease.