PSX Plunges to Historic Low: Rs713 Billion Wiped Out Amid Geopolitical Fears & Oil Price Surge

Pakistan’s stock market experienced a dramatic downturn on Thursday, February 20th, 2026, as the benchmark KSE-100 index plummeted to 172,170.29 – a 3.74% decrease representing a 6,683-point drop. This marked the steepest single-day decline in the exchange’s history, wiping out Rs713 billion in market capitalization during the first session of Ramazan.

Geopolitical and Economic Pressures

The sell-off was triggered by a confluence of factors, primarily mounting geopolitical tensions and a surge in global oil prices. International crude prices rose over 6% in two days, fueled by fears of supply disruption linked to escalating tensions between the United States, and Iran. As a net oil importer, Pakistan is particularly vulnerable to these price increases, intensifying macroeconomic concerns and eroding investor confidence.

Did You Know? Trading volume fell 22.17% to 543 million shares, while traded value plunged 45.26% to Rs27.39bn on Thursday.

According to Farid Alam of AKD Securities, investors reacted quickly to perceived regional instability, referencing reports of a possible US attack. Pakistan’s geographic proximity and existing economic vulnerabilities amplified market anxiety. Domestic political tensions, including sit-ins and roadblocks, further contributed to the negative sentiment.

Foreign Investment and Market Sentiment

Data from the Securities and Exchange Commission of Pakistan indicated that 125 foreign companies had exited the country. However, Mr. Alam clarified that this did not necessarily signify a sudden capital flight, as many of these firms were dormant, project-based, or undergoing restructuring. He emphasized that headlines can disproportionately affect market sentiment, even when underlying fundamentals remain stable.

Expert Insight: Broad-based declines of this magnitude are often driven by shifts in investor sentiment, the unwinding of leveraged positions, and broader macroeconomic risks, rather than deliberate manipulation by large investors.

Mohammed Sohail, Chief Executive of Topline Securities, pointed to reports of delays in the Reko Diq project, aggressive foreign selling, and corporate results that fell short of expectations as contributing factors to the downturn. Persistent foreign corporate outflows and increased selling by local insurance companies further exacerbated the downward pressure.

Looking Ahead

Shortened trading hours due to Ramazan likely curtailed participation and amplified price swings. Index-heavy stocks – including Fauji Fertiliser Company, Engro Holdings, United Bank Ltd, Oil and Gas Development Company, Pakistan Petroleum Ltd, and Meezan Bank – collectively erased 2,113 points from the benchmark. Analysts expect the 172,000-170,000 range to serve as critical support levels, while 180,000 has emerged as immediate resistance for any potential recovery attempt.

Faysal Bank reported CY25 earnings of Rs22.5bn, down 6% year-on-year, but also announced a cash dividend of Rs2 per share. Khalid Saifuddin, a financial and technical analyst, suggested the market had already factored in most positive developments and reached historic highs, making it vulnerable to correction. He described the earlier rally as a “bull trap” and Thursday’s decline as a release of accumulated pressure.

Political uncertainty, cross-border tensions, and regional risk perceptions, particularly those related to US-Iran developments, were cited as amplifying volatility. Investors are also closely monitoring the outcome of the prime minister’s engagement with US leadership, as ambiguity regarding Pakistan’s geopolitical positioning tends to unsettle markets. Upcoming external payment obligations, including a maturing Eurobond in April, could also contribute to volatility.

Frequently Asked Questions

What caused the stock market decline?

Mounting geopolitical tensions, a surge in global oil prices, reports of delays in the Reko Diq project, aggressive foreign selling, and corporate results falling short of expectations all contributed to the decline.

How much value was lost on the Pakistan Stock Exchange?

The benchmark KSE-100 index dropped 6,683 points, wiping out Rs713 billion in market capitalization.

What do analysts expect to happen next?

Analysts expect the 172,000-170,000 range to serve as critical support, while 180,000 has emerged as immediate resistance for any meaningful recovery attempt.

Given the complex interplay of geopolitical factors and economic vulnerabilities, how might evolving regional dynamics further shape investor confidence in Pakistan’s financial markets?