Pakistan Stock Exchange (PSX) could benefit from improving global sentiment, easing oil prices and enhanced prospects for monetary easing after the US Democratic Party secured control of both the Senate and House of Representatives in the 2026 midterm elections, according to a report by Al Habib Research.
The research house said the election outcome represented a significant political setback for US President Donald Trump and the Republican Party, reflecting voter concerns over inflation, cost-of-living pressures, economic conditions, and foreign policy issues. It noted that Democratic control of Congress is likely to increase scrutiny of the White House’s policy agenda and could influence future decisions on trade, fiscal spending, defence and foreign affairs.
Al Habib Research said the development may have far-reaching implications for the Middle East, particularly regarding US-Iran relations. The report suggested that increased congressional pressure for diplomatic engagement with Iran could help lower geopolitical tensions, improve regional stability and reduce risks surrounding the Strait of Hormuz.
The possibility of reduced Iran-related tensions weighed on international crude oil prices, with Brent and WTI futures extending declines amid expectations of a softer geopolitical environment. The brokerage noted that lower oil prices would be particularly beneficial for Pakistan, which remains heavily dependent on imported energy.
According to the report, softer crude prices could reduce Pakistan’s petroleum import bill, strengthen the country’s external account position and ease pressure on the rupee. The resulting improvement in inflation dynamics may also give the State Bank of Pakistan more room to pursue further monetary easing, supporting economic activity and corporate profitability.
Al Habib Research said Pakistan may also find opportunities to deepen engagement with Washington on economic cooperation, governance and regional security matters, although key foreign policy decisions would continue to be shaped by the US administration.
For equity investors, the report maintained a constructive view on the PSX, citing the potential for stronger investor confidence, improved foreign investment sentiment and enhanced market liquidity. It added that lower interest rates and a stable currency environment could particularly benefit interest-rate-sensitive sectors.
The brokerage identified oil marketing companies, fertilizer manufacturers, cement producers, power sector firms and selected consumer stocks as potential beneficiaries of lower energy costs and an improving macroeconomic backdrop. However, it advised investors to closely monitor exploration and production companies and refineries, where earnings could remain sensitive to fluctuations in global crude prices and refining margins.
Despite the positive outlook, the research house cautioned that renewed US-Iran tensions, disruptions in the Strait of Hormuz, changes in US trade policies, dollar strength and uncertainties surrounding Pakistan’s IMF programme could still challenge market performance.
“Near-term prospects for the PSX remain constructive, supported by improving geopolitical sentiment and the possibility of lower international oil prices,” the report concluded, adding that the medium-term outlook would depend largely on oil price trends, domestic monetary policy, IMF programme progress and external account stability.