Pakistan stocks fall 3.2% amid concerns over US-Iran negotiations
The benchmark KSE-100 Index plunged 5,520 points during the week ended May 15, 2026, as investor sentiment remained weak due to slower progress in negotiations linked to tensions between the United States and Iran.
The index closed at 165,596 points, recording a weekly decline of 3.2%.
Analysts said geopolitical uncertainty continued to weigh heavily on market confidence, keeping investors cautious ahead of Pakistan’s upcoming federal budget announcements.
Despite the decline in equities, several positive economic developments emerged during the week.
Pakistan successfully launched its inaugural $250 million three-year Panda Bond in China at a coupon rate of 2.5%, with the issuance attracting demand more than five times the offered amount.
Meanwhile, workers’ remittances rose 11% year-on-year to $3.5 billion in April 2026 compared with $3.2 billion in the same month last year. On a cumulative basis, remittances increased 8% year-on-year to $33.9 billion during the first 10 months of fiscal year 2025-26.
Pakistan’s market also outperformed the MSCI Frontier Markets Index by 4.1% during FY26 to date.
Following the latest MSCI review effective May 29, Pakistan’s weight in the MSCI Frontier Markets Standard Index is expected to reach around 5.8%. Habib Metropolitan Bank was added to the Standard Index, while CRTM, HINOON, and SEARL were included in the Small Cap Index.
Economic indicators released during the week showed mixed trends.
Auto sales, including cars, vans, jeeps, and electric vehicles, surged 42% month-on-month in April 2026 to 22,000 units and more than doubled compared with the same period last year.
Pakistan’s budget deficit during the first nine months of FY26 stood at Rs856 billion, equivalent to 0.7% of GDP, while Federal Board of Revenue revenues increased 10% year-on-year to Rs9.306 trillion.
Pakistan’s economy expanded 3.99% during the third quarter of FY26, supported by growth in industry, agriculture, and services sectors.
In the Treasury bill auction held on May 13, the government raised Rs949.8 billion against a target of Rs1 trillion. Yields increased across most tenors, reflecting cautious market expectations regarding interest rates and inflation.
The country’s central government debt rose 0.8% month-on-month to Rs80.5 trillion by March 2026, marking a 9.3% increase compared with the previous year.
According to State Bank of Pakistan, official foreign exchange reserves increased slightly to $15.9 billion, while total liquid reserves reached $21.3 billion.
The Pakistani rupee appreciated marginally during the week, ending at 278.61 against the US dollar compared with 278.70 a week earlier.
Analysts said the short-term direction of the KSE-100 index will largely depend on geopolitical developments and policy measures expected in the upcoming budget.
The benchmark index is currently trading at a price-to-earnings ratio of 7.7 times while offering an estimated dividend yield of around 6.6%.