Pakistan Stock Market Sees Sharp Declines Amid Economic and Geopolitical Pressures

Karachi: The Pakistan Stock Exchange (PSX) has experienced significant volatility in recent sessions as investor confidence erodes amid domestic economic challenges and external uncertainties. The benchmark KSE-100 Index has been under sustained selling pressure, reflecting broader concerns over Pakistan’s macroeconomic outlook.

On February 23, 2026, the KSE-100 plunged sharply, wiping out more than 5,400 points — a drop of over 3% — as broad-based selling gripped equities across major sectors. The index closed at 167,691 points, falling from the previous session as investors sought to reduce risk exposure.

The decline followed a period of elevated volatility in which the benchmark briefly moved intraday by over 6,200 points before settling at lower levels, underscoring weakness across energy, banking, fertiliser and industrial stocks.

On February 24 and 25, the downward trend continued. The KSE-100 fell a further 1,432 points, ending the session at approximately 166,258 points as cautious sentiment persisted. Analysts noted that bouts of selling were driven by heightened market nervousness despite occasional intraday rebounds.

Drivers of Market Weakness

Financial markets in Pakistan have been grappling with multiple pressures:

• Economic Uncertainty: Sluggish corporate earnings, persistent inflation and external imbalances have weighed on investor sentiment.

• IMF Review in Focus: Pakistan is currently navigating a critical review by the International Monetary Fund (IMF) under its multi-billion-dollar financing arrangement, which could affect future disbursements and economic support.

• Geopolitical Strains: Although direct links between security tensions and stock market performance vary in commentary, risk aversion in global markets often amplifies pressure on emerging markets like Pakistan.

While geopolitical factors — including tensions along the Afghanistan border and broader regional risks — have shaped overall sentiment, market data indicates that the declines are primarily tied to structural economic concerns and investor risk aversion.

Impact on Investors

The recent slide in equity prices has eroded significant market value and highlighted fragilities in investor confidence. Heavyweights such as banks, fertiliser and energy companies were among the most affected, contributing to the broader index’s downturn.

Market participants remain cautious, awaiting clearer signals from both domestic economic developments and the ongoing IMF assessment. Analysts say meaningful recovery may require stronger macroeconomic indicators and renewed policy clarity to restore confidence.

Rather than indicating a systemic economic collapse, the latest sell-offs at the PSX reflect intensified market corrections driven by economic uncertainty, weak corporate performance, and risk-off investor behaviour. While geopolitical events add to market jitters, Pakistan’s financial challenges — including inflation, fiscal pressures and reliance on external financing — remain central to the stock market’s struggles in the current environment.