KARACHI: The Pakistan Stock Exchange (PSX) experienced a massive sell-off today Wednesday following the decision by US President Donald Trump to end the Iranian ceasefire, panicking the investors.
Trump Kills Iran Cease-fire at NATO Summit
Addressing reporters in Ankara, Turkey, where he was attending the NATO summit, Trump ends Iran ceasefire after a night of back-and-forth missile strikes between US forces and Iran. “It is my opinion that for me, the deal was over,” Trump said, adding that he considered further negotiations “a total waste of time.” This move came in response to what was perceived as Iran’s attack on commercial shipping in the Strait of Hormuz, followed by a US air strike and renewed sanctions on Iranian oil exports.
Fall in KSE-100 Index After Breakdown of Ceasefire
Breaking news of Trump ends Iran ceasefire saw the KSE-100 Index fall by more than 6,400 points on Wednesday. Prior to this, the index had fallen by more than 1,199 points after Tuesday’s trading, when the investors pulled out profits amid the new highs that the index had been enjoying. This latest development brought more pressure to bear, with stocks being sold across various sectors, such as automobile assemblers, cement, commercial banks, fertiliser, oil marketing firms, and power generation.
Equities that are highly indexed like HUBCO, MARI, OGDC, PSO, SSGC, SNGPL, and WAFI were all down, following panic sales on the exchange. Volume was high as investors tried to cut down their investment in equity due to the confusion created by the termination of the Iran ceasefire by Trump.
Rise in Oil Prices after Ceasefire Breakdown
After Trump’s decision to break off the Iran ceasefire, the global oil markets experienced an immediate rise in oil prices based on worries about any disruptions in the oil supplies through the Strait of Hormuz. Brent crude reached $78.92 per barrel, reflecting a daily increase of almost 5%. The price of WTI crude was also rising and reached $74.85 per barrel.
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The rise in oil prices was caused by the return of worries about the possible start of the war in the Middle East. Given that Trump decided to end the Iran ceasefire, the expectation is that the oil markets will experience volatility because of the ability of Iran to interfere with the shipments through the strait, which has been a channel for one-fifth of global oil and gas trade.
Market Sentiment Becomes Prudent
As soon as Trump called off the ceasefire deal with Iran, the sentiment of investors in Pakistan’s equity markets became one of caution. However, despite this fact, some brokers pointed out that the direct involvement of Pakistan in the ongoing war is low, as Pakistan is not involved directly in the dispute.
Nevertheless, the situation continues to be under careful scrutiny due to the possible impact of increased oil prices on inflation and imports. The expectation of high corporate earnings in the upcoming reporting season had provided the support for investors’ sentiment until the market got hit by geopolitical shocks.
What is next?
As Trump puts an end to the Iran ceasefire, it is time to see if new negotiations could stop the situation from turning into a full-fledged confrontation. According to Trump, the negotiations of US diplomats could go on; however, he was rather pessimistic about their outcome. At this point, Iran has not officially stated its position regarding the termination of the ceasefire agreement.
In the case of Pakistan, upcoming sessions are going to be focused on the development of events between Washington and Tehran and their effects on the oil market.
Nayab Fatima is a media professional specializing in fact-based journalism, research, and analytical reporting on technology, telecom, aviation, and automobiles.
