Pakistan’s benchmark stock index, the KSE100, has plunged by nearly 16,700 points—marking a steep 14.06% decline—since April 22, following a deadly terror attack in Pahalgam, Kashmir. The attack, allegedly carried out by Pakistan-sponsored terrorists, claimed the lives of 26 Indian tourists. The ensuing fear of Indian retaliation has sent shockwaves through Pakistan’s financial markets, triggering mass sell-offs.
On May 7, India launched Operation Sindoor, targeting nine terror camps in Pakistan and Pakistan-occupied Kashmir. In response, Pakistani Prime Minister Shehbaz Sharif issued a stern warning, promising strong retaliation from Islamabad. The market reacted swiftly. On Thursday, the KSE100 nosedived by 8,400.89 points or 7.64%, settling at 101,771.17. The crash prompted a one-hour trading halt at the Pakistan Stock Exchange amid unverified reports of loud explosions in Karachi and Lahore.
With this sharp fall, the index has now shed 16,659.18 points compared to its April 22 closing level of 118,430.35. In stark contrast, Indian stock markets remained relatively unaffected. Benchmark indices Sensex and Nifty have gained between 0.6% and 1.2% over the same period.
Market analysts suggest that while geopolitical tensions often stir fear, Indian markets have historically shown resilience. “Since the 1990s, several high-stake India–Pakistan episodes—from Kargil and Parliament attacks to Uri and Pulwama—have tested nerves. But the Sensex has consistently demonstrated a remarkable immunity to sabre-rattling. Market corrections, if any, have been modest, short-lived and largely sentiment-driven. Fundamentals have prevailed,” noted a recent report by Anand Rathi.
Meanwhile, Pakistan confirmed Indian missile strikes on May 7 in areas including Bahawalpur, Kotli, Muzaffarabad, and Muridke, with additional reports suggesting impacts in Gulpur, Bhimber, Bagh, Chak Amru, and Sialkot. Tensions are rising rapidly as concerns grow over further escalation.
Credit rating agency Moody’s has warned that continued hostilities with India could damage Pakistan’s economic recovery. A protracted conflict would likely hamper fiscal consolidation efforts and delay macroeconomic stability—an already fragile goal for the struggling Pakistani economy.
Adding to the panic, unexplained explosions were reportedly heard in Lahore and Karachi, further spooking investors. India, meanwhile, has responded diplomatically as well—suspending the Indus Water Treaty and downgrading diplomatic ties with Pakistan, signaling a multi-pronged strategy in this volatile standoff.
