Pakistan Stock Exchange Stalls Amid Geopolitical Jitters, Mixed Economic Signals

The Pakistan Stock Exchange (PSX) traded in a narrow range during the past week, with the benchmark KSE-100 index shedding 119 points, or 0.1%, to close at 170,765 as geopolitical uncertainty and domestic developments kept investors on edge.

The week opened with muted activity. The index edged up 269 points (0.16%) to 171,153 on Monday, then added another 250 points (0.15%) to reach 171,402 on Tuesday as oil prices softened. Momentum built on Wednesday, with the KSE-100 surging 830 points (0.48%) to 172,233. However, renewed geopolitical concerns triggered a sharp 1,734-point decline (1.01%) on Thursday, dragging the index down to 170,499. A modest recovery of 266 points (0.16%) on Friday brought the week to a close at 170,765.

“Overall, geopolitical developments kept the market flat,” Arif Habib Limited (AHL) noted in its weekly commentary. Early optimism driven by hopes of progress in U.S.-Iran talks and softer crude prices gave way to caution as tensions resurfaced and oil prices rebounded.

On the energy front, power generation rose 5.1% year-on-year to 14,943 gigawatt-hours in August 2026, marking the third-highest August output on record. Higher hydel, coal, gas, and wind contributions supported the increase. However, generation costs jumped 38% to Rs10.01 per kilowatt-hour due to a costlier fuel mix—including RLNG and furnace oil—and elevated global oil prices, prompting distribution companies to seek a positive fuel cost adjustment of Rs1.73/kWh.

Oil production inched up 1.4% week-on-week to 68,500 barrels per day, driven by higher flows from Makori East, Maramzai, and Mardankhel fields. Gas output slipped 2.5% to 2,934 million cubic feet per day, weighed down by lower production from Mari, Uch, Kandhkot, and Shewa.

Pakistan’s oil and gas reserves stood at 3,720 million barrels of oil equivalent as of June 2026. Oil reserves climbed 15% year-on-year to 276 million barrels, while gas reserves rose 9% to 20,664 billion cubic feet. New discoveries added 53.5 million barrels of oil and 773 billion cubic feet of gas, placing the country’s estimated reserve life at roughly 19 years.

Total liquid foreign exchange reserves edged up 0.07% week-on-week to $26.8 billion. State Bank of Pakistan reserves increased 0.05% to $21.4 billion, while commercial banks’ reserves grew 0.15% to $5.41 billion. Import cover held steady at 3.03 months.

Attock Refinery, Pakistan Refinery, National Refinery, and Cnergyico signed upgrade agreements with Inter State Gas Systems (ISGS) under the Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield Refineries 2023, as amended in February and August 2026. Petroleum prices moved in opposite directions under the daily pricing mechanism: high-speed diesel fell to Rs412.12 per litre, while motor spirit rose to Rs389.28 per litre.

JS Global’s Wadee Zaman echoed the cautious tone, noting that geopolitical uncertainty and domestic political developments continued to weigh on sentiment. Brent crude averaged $103.10 per barrel, down 2.2% week-on-week. Domestic motor spirit and high-speed diesel prices declined by Rs1.51 and Rs12.80 per litre, respectively, snapping five consecutive weeks of increases.

On the external front, Pakistan and the IMF began talks for the fourth review of the $7 billion Extended Fund Facility, potentially unlocking the fifth tranche of $1 billion. Meanwhile, the Asian Development Bank revised its FY27 GDP growth forecast for Pakistan down to 3.7% from 4.5%. The country secured $4.7 billion in foreign loans during the first two months of FY27, while profit and dividend repatriation fell 13.4% year-on-year to $557 million.

In a significant development, four of Pakistan’s five local refineries formalized upgrade agreements with the government, paving the way for an estimated $6 billion in investment over the next five years. In the latest Pakistan Investment Bond auction, the government raised Rs181 billion, with yields rising 20–75 basis points across tenors. The State Bank’s foreign exchange reserves remained stable at $21.4 billion.

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