Political turmoil in KP sends Pakistan Stock Exchange into decline

The Pakistan Stock Exchange (PSX) witnessed a broad sell-off on Monday as political uncertainty surrounding the imposition of governor’s rule in Khyber-Pakhtunkhwa (KP) weighed on investor confidence at the start of the trading week.

The benchmark KSE-100 Index fell by 752.13 points, or 0.45%, to 166,337.14 by midday. The decline reflected growing concerns over political instability following emergency measures in KP and reports of a police crackdown against Pakistan Tehreek-e-Insaf (PTI) leaders and workers.

During early trading, the index had dropped 305.64 points, or 0.18%, to 166,783.63 by 9:43am. It later fluctuated between an intraday high of 166,988.32 and a low of 166,002.23. Trading volume reached 54.39 million shares, with the total traded value standing at Rs3.87 billion.

Selling pressure affected several major sectors, including oil marketing companies, automobile assemblers, cement manufacturers, power companies, commercial banks and oil and gas exploration firms.

Market sentiment remained fragile as investors assessed the potential economic implications of the latest political developments. Analysts said uncertainty surrounding the situation in KP had added to existing concerns over inflation, interest rates and geopolitical tensions.

Fawad Basir, head of research at KTrade, said the market had fallen by 1,065 points at one stage, extending its losses amid regional uncertainty and political tensions following the imposition of emergency measures in parts of KP.

He noted that listed companies’ financial results for June 2026 had generally exceeded expectations. However, elevated commodity prices continued to fuel inflationary pressures, potentially influencing the State Bank of Pakistan’s monetary policy decision later this month.

Basir said market participants were increasingly concerned about the direction of interest rates. Following the previous Monetary Policy Committee meeting, some analysts believed that the policy rate could remain unchanged at the next review, while a 100-basis-point increase could become possible at a subsequent meeting.

The International Monetary Fund’s recent staff mission for the review of Pakistan’s loan programme had also brought the exchange rate and interest rates into focus. Both factors remain important for economic stability as Pakistan navigates the effects of the ongoing Middle East crisis.

Meanwhile, international oil prices declined in Asian trading amid expectations of increased Russian supplies. The movement followed US President Donald Trump’s announcement that Russia and Ukraine had agreed to halt attacks on each other’s energy facilities after a US deal involving diesel supplies from Moscow.

However, concerns about a broader regional conflict persisted following reports of a Houthi attack on Riyadh’s international airport, adding another layer of uncertainty to global markets.

Despite the decline in oil prices, easing supply concerns offered limited relief to Pakistani investors. Political uncertainty, inflation risks and changing expectations about monetary policy continued to weigh on market sentiment.