Easing geopolitical tensions and improving economic indicators fuel strong weekly rally at PSX
KARACHI: The benchmark KSE-100 Index of the Pakistan Stock Exchange (PSX) ended a volatile trading week with a strong gain of 6,523 points, or 3.8 per cent, as improving investor sentiment and easing geopolitical tensions supported a broad-based rally across the market.
The KSE-100 Index closed the week at 178,922 points after witnessing sharp fluctuations during the five trading sessions. Analysts attributed the weekly advance in the KSE-100 Index primarily to growing optimism surrounding a potential peace agreement between the United States and Iran, which helped reduce uncertainty in global financial markets.
Geopolitical Optimism Supports Market Rally
Investor confidence improved significantly as reports suggested progress towards a US-Iran peace agreement. The easing of tensions in the Middle East contributed to a decline in global crude oil prices, improving Pakistan’s macroeconomic outlook and supporting gains in the KSE-100 Index.
Market participants said lower oil prices are generally viewed as positive for Pakistan’s economy, as they help reduce the import bill and ease inflationary pressures.
The improved geopolitical environment encouraged buying across major sectors, including banking, energy, fertiliser and cement stocks, helping the KSE-100 Index maintain its upward momentum despite intermittent profit-taking.
Positive Economic Indicators Boost Sentiment
Several encouraging economic developments also supported the performance of the KSE-100 Index during the week.
Pakistan recorded a current account surplus of US$459 million in May 2026, reversing a deficit of US$276 million in April. Meanwhile, the country’s Real Effective Exchange Rate (REER) increased to 106.15 in May from 105.84 a month earlier.
Foreign investment data also painted a positive picture, with net Foreign Direct Investment (FDI) rising sharply to US$214 million in May compared with US$54 million in April.
Analysts said these indicators strengthened confidence in Pakistan’s external sector and provided additional support to equities.
Institutional Buying Drives Market
Market flow data showed that mutual funds and corporate investors remained key buyers throughout the week. Mutual funds recorded net purchases of US$65 million, while corporates bought equities worth US$7 million.
In contrast, insurance companies and individual investors emerged as net sellers, offloading shares worth US$58 million and US$10 million, respectively.
Outlook Remains Positive
Analysts expect the KSE-100 Index to remain sensitive to developments surrounding the US-Iran peace process, global oil prices and upcoming domestic economic data.
With improving foreign investment inflows, a return to current account surplus and easing geopolitical risks, the KSE-100 Index may continue attracting investor interest. However, global market conditions and policy developments are likely to remain key drivers of market direction in the weeks ahead.
