PSX: KSE-100 falls 2.75% in week as oil surge, US-Iran tensions weigh

Pakistan Stock Exchange's (PSX) benchmark KSE-100 index fell 2.75% this week as renewed tensions between the United States and Iran, surging global oil prices and concerns over regional stability weighed on investor sentiment.

The index declined 4,817 points week-on-week to 170,512 points from 175,329 points last week, remaining in negative territory throughout the week, according to Arif Habib Ltd.

Market participants remained cautious amid heightened geopolitical uncertainty and concerns that higher energy prices could add to inflationary pressures and corporate costs.

Brent crude returned above USD 100 a barrel as fighting intensified between Iran-backed Houthis and Saudi Arabia, with advances around the Bab-el-Mandeb Strait raising concerns over regional stability and potential disruptions to global trade.

Fuel prices add to pressure

Domestic fuel prices also continued to rise, adding to investor concerns over energy costs.

Petrol prices increased by PKR 25 per liter week-on-week to PKR 370.80, while high-speed diesel prices rose by PKR 20 to PKR 398.04 per liter.

The government has also decided to reduce the refinery crack margin for high-speed diesel to USD 30 per barrel from USD 41 per barrel under wartime conditions, according to the report.

Higher international oil prices and domestic fuel costs are likely to remain a key risk for the market, particularly for energy-intensive sectors and the country’s external account.

Oil and gas production improves

Pakistan’s domestic oil and gas production recorded modest gains during the week.

Oil production increased 1.8% week-on-week to 68,400 barrels per day, primarily supported by higher output from the Adhi, KPD and Sharf fields.

Gas production rose 2% to 3,088 million cubic feet per day, driven by higher production from Mari and Uch, as well as the revival of production from the Shewa field at 68 million cubic feet per day.

Remittances strengthen

Pakistan’s external sector continued to receive support from strong workers’ remittances.

Remittances sent by overseas Pakistanis rose 17% year-on-year to USD 3.65 billion in August 2026, compared with USD 3.1 billion in the same month a year earlier. On a month-on-month basis, inflows increased 1%.

During the first two months of fiscal year 2026-27, remittances rose 15% year-on-year to about USD 7.2 billion.

The continued improvement in remittance inflows is expected to provide support to Pakistan’s foreign exchange liquidity and external financing position.

Foreign exchange reserves rise

Pakistan’s total liquid foreign exchange reserves increased 5.3% week-on-week to USD 23.7 billion.

Reserves held by the State Bank of Pakistan rose 7% to USD 18.3 billion, while commercial banks’ reserves remained broadly stable at USD 5.4 billion.

The increase improved the country’s import cover to 2.74 months from 2.56 months previously, strengthening the external liquidity position.

IMF review in focus

Investor attention is also turning toward the International Monetary Fund review.

The IMF is expected to visit Pakistan on Sept. 23 to assess progress under the USD 7 billion Extended Fund Facility (EFF) and USD 1.4 billion Resilience and Sustainability Facility (RSF) programs.

The mission is expected to remain in Pakistan until early October and conduct the fourth EFF review and third RSF review for the year ended June 2026.

The upcoming review is likely to remain an important market catalyst, with investors watching progress on fiscal consolidation, energy-sector reforms and other program commitments.

Cement sector profits rise

Pakistan’s cement sector reported stronger profitability during fiscal 2026.

Sector profits increased 13% year-on-year to PKR 138 billion, supported by a 7% increase in dispatches to 50.5 million tons and capacity utilization of around 60%.

The sector also benefited from a 33% decline in finance costs, which helped improve overall earnings despite continued cost pressures.

Auto policy focuses on EVs

The government has finalized the draft Auto Policy 2026-31 following a review by government committees, with a strong focus on electric vehicle adoption.

The policy is still subject to consultations with the IMF, expected in October, followed by approval from the federal Cabinet.

Outlook remains tied to geopolitics, rates and IMF

Arif Habib Ltd. said market direction is likely to remain sensitive to developments in the US-Iran conflict and the upcoming monetary policy decision.

The brokerage said the IMF review is also expected to be a key driver of investor sentiment in the coming weeks.

At current levels, the KSE-100 is trading at a price-to-earnings ratio of 7.5 times and offering a dividend yield of 6.5%, according to Arif Habib Ltd.