Pakistan market loses ~9% during the first few minutes of today’s session amidst escalating tensions between the US, Israel & Iran. The Pakistan market trading also halted for an hour as a risk management rule set by the Pakistan Stock Exchange, according to a report published by Topline Pakistan Research.
§ Background: On Feb 28, 2026, reportedly, the duo of Israel & US carried out strikes in Iran, resulting in killing of the Supreme Leader of the Iran “Syed Ayatollah Khamenei” and other top civil military leaders of the country.
§ In response, Iran also aggressively targeted multiple bases of the US in Middle Eastern countries, namely Bahrain, UAE, Qatar, KSA and others and directly attacked Israel over the weekend. As a result, the airspace of Middle Eastern countries is also closed, and some countries/states, including Dubai, Abu Dhabi, and Kuwait, have also announced the temporary suspension of their stock exchanges. The war-like situation is continuing between the duo and Iran, and experts believe that the war may continue for a month.
§ For Pakistan, although the involvement is not direct, there are economic implications in the form of higher oil prices due to high dependence on imported oil, an increase in imported inflation, and the investors’ confidence could further weaken investment prospects in the country due to the presence of hostility on both the east and west sides of Pakistan.
§ Outlook on Market: We believe that, due to the evolving nature of the conflict and the involvement of various countries, volatility may continue until the resolution or de-escalation of this conflict. The market has already lost 19% from its high of 189k since 23 Jan 2026. However, we believe that any further fall in the index level may provide an attractive entry point for investors, as Pakistan’s recent reforms have created a decent buffer (reserves level) for absorbing external shocks. Furthermore, in our view, the existing regime will continue to adopt cautious policies to navigate this period.
§ With today’s fall, the Pakistan market has again gone back to an attractive level of below 6.5x 2027 PE (Topline Universe), lower than the historic average of 6.9x.
§ Outlook on Economy: Iran has allegedly attacked vessels in the Strait of Hormuz, which accounts for 20% of the world’s oil supply. Countries such as KSA, UAE, Kuwait, Iraq, and Qatar use this route largely to export oil. This has also led to a 6-7% hike in crude oil prices in today’s session, while oil prices have increased by 15% over the last 7 sessions due to a volatile regional situation.
§ Imports and Current Account: Pakistan’s annual petroleum imports (Crude + Refined + LNG +LPG) stand at US$15-16bn. Every 10% change in oil prices can increase the petroleum import bill by US$1.5-1.6bn. Some of the other products that are directly linked to oil prices are edible oil (US$4bn in imports), coal (US$1bn), and Rubber/Tyres (< US$1bn).
§ Inflation: Rising oil prices will also impact inflation, directly and indirectly. Every 10% increase in crude oil prices may elevate inflation estimates by 40-50bps, considering the direct impact on fuel prices and edible oil. At the same time, an indirect impact will also be felt in subsequent days/weeks.
§ Currency: The expectations of a rise in imports + growing concerns in the Middle East, if any (constitutes > 50% of total remittances), might result in weakening of PKR, in our view.
§ FX reserves: Due to considerable improvement in credit rating and SBP’s proactive FX interventions, we believe SBP’s reserves continue to remain at a comfortable level.
