PSX posts weekly loss as Strait of Hormuz tensions weigh on sentiment

KARACHI: The Pakistan Stock Exchange (PSX) came under pressure during the outgoing week after two weeks of gains, as tensions linked to the Strait of Hormuz and higher oil prices weakened investor confidence and raised concerns about the economic outlook.

The benchmark KSE-100 index ended the week in negative territory, although a rally in the final trading session reduced the scale of losses. Arif Habib Ltd said the index settled at 170,672 points, down 3,267 points, or about 1.88pc, over the week.

The market remained under strain because of delays in a second round of US-Iran negotiations, despite an extension in the ceasefire reportedly secured at Pakistan’s request. Topline Securities Ltd said the decline reflected elevated geopolitical risks, with the impasse between Washington and Tehran triggering widespread selling in major sectors such as banking, fertilisers, and oil and gas exploration.

Global markets also weakened as tensions around the Strait of Hormuz disrupted supply routes and pushed up oil prices. Brent crude increased 3.2pc during the week to close at $104.8 per barrel, adding to inflation worries for oil-importing countries including Pakistan.

Average daily trading volume at the PSX stood at 1.2 billion shares, while average traded value was Rs46bn. Individual investors were net buyers of $14.6m. On the other hand, foreign corporates and insurance companies were major sellers, with net sales of $12.5m and $11.9m, respectively.

Late-session recovery

AKD Securities Ltd said investor appetite for risk weakened amid renewed diplomatic tensions. However, sentiment improved late on Friday after confirmation that Iranian Foreign Minister Abbas Araghchi would visit Pakistan over the weekend, which raised expectations of renewed diplomatic engagement.

The US president’s decision earlier in the week to extend the ceasefire indefinitely also prevented a steeper decline and kept alive hopes of a possible resolution. Dawn reported that speculation surrounding the Iranian foreign minister’s visit had initially been read by some investors as a sign that talks between Washington and Tehran could resume.

Macroeconomic developments

On the economic front, several developments offered some support to sentiment. Pakistan received the final $1bn tranche of Saudi Arabia’s $3bn support package and repaid $3.45bn to the UAE against maturing deposits, meeting its external obligations on time.

State Bank of Pakistan foreign exchange reserves rose by $18m week-on-week to $15.1bn as of April 17. The rupee remained largely stable and appreciated 0.02pc to close at Rs278.85 against the dollar.

Pakistan also raised an additional $250m through the exercise of a greenshoe option, taking the total size of its latest Eurobond issuance to $750m after a four-year gap. In another development, the World Bank reclassified Pakistan from the South Asia region to the Middle East, North Africa, Afghanistan and Pakistan (MENAAP) grouping, effective from fiscal year 2026.

Production and sector performance

Economic data released during the week showed gas production fell 3.1pc week-on-week to 2,962mmcfd in the second week of April, mainly because of lower output from Uch and a shutdown at Shewa. Oil production declined 1.1pc to 66,838 barrels per day due to reduced output from the Makori East and Kunar Pasakhi Deep fields.

Repatriation of profits and dividends dropped 35.1pc year-on-year to $102.4m in March, though it increased sharply on a monthly basis. For the first nine months of FY26, repatriation rose 3.4pc to $1.78bn.

Among sectors, textile weaving, refinery, and synthetic and rayon shares recorded gains, while jute, pharmaceuticals, and cement stocks underperformed.

Analysts said the market’s near-term direction would remain closely linked to developments in US-Iran relations. They added that the ongoing corporate earnings season and the upcoming monetary policy decision would also shape sentiment. Despite recent volatility, valuations remain attractive, with the market trading at a price-to-earnings ratio of around 8.3 times and offering a dividend yield of about 6.3pc. AKD Securities Ltd projected that if geopolitical conditions improve, the index could reach 263,800 points by December.