India’s decisive response to the recent terrorist attack in Pahalgam has come at a steep cost for Pakistan. Within just 15 days, India took bold steps that pushed Pakistan into a corner — starting with the cancellation of the Indus Waters Treaty, followed by halting trade through the Attari border. On Wednesday night, India launched Operation Sindoor, a calculated military strike that marked the culmination of its strategic retaliation. With coordinated actions on multiple fronts, Pakistan now finds itself in a state of economic and diplomatic distress. Unsurprisingly, these developments triggered a sharp reaction in Pakistan’s financial markets. Fears of further escalation, particularly missile strikes by India, caused a massive crash in the Karachi Stock Exchange (KSE). On Thursday, the market plunged by 7.5%, forcing authorities to suspend trading in an attempt to contain the panic.
Trading Halted Amid Market Meltdown
On Tuesday, the KSE 100 Index closed at 113,568.51 points. However, even before markets opened the next day, global headlines were dominated by reports of India’s military action against terrorist camps. The KSE opened with a steep fall, dropping 5.83% to 107,007.68 points. Meanwhile, Indian markets remained relatively stable, with positive investor sentiment continuing.
Economic Crisis Deepens for Pakistan
Pakistan’s economy is already on shaky ground, heavily reliant on external borrowing to meet basic operational needs. Just as signs of recovery were beginning to emerge — buoyed by improved sovereign credit ratings and a global drop in oil prices — the Pahalgam attack and India’s subsequent response shattered market confidence.
Last year, Pakistan's stock market delivered its highest return in 22 years, reigniting interest among international investors. But the post-strike environment has reversed that momentum overnight. With rising uncertainty and selling pressure, Pakistan’s markets are now facing a full-blown crisis.