Pakistan stock market crashes nearly 10%, sparking trading halt: Is US-Iran war behind the worst fall in history?

Pakistan stock market crash: The Pakistan stock market's key gauge, KSE-30 Index, plunged as much as 9.6% at the open on Monday, March 2, sparking a 45-minute trading halt as the tensions in the Middle East spiked following the US and Israel’s strikes on Iran.

Moreover, tensions with Afghanistan have also escalated, further pressuring the country's stock market.

The KSE-30 index lost almost 5000 points or 9.6% to hit the day's low of 46,351.64 in intraday deals today. According to a Reuters report, this is the worst fall on record for Pakistan's stock market.

The KSE-30 index was last trading 9.25% lower as trading resumed. Despite today's losses, the Pakistan stock market remained 32% higher for the year.

The decline coincided with steep losses in global equities, though the magnitude of the fall in India’s neighbouring country was among the sharpest. Asian shares dropped 1.3%, while US equity-index futures fell 0.6%, trimming earlier losses. Back home, the Indian stock markets were down around 1.5% in the afternoon session.

In Europe, EURO STOXX 50 futures declined 1.3%, and DAX futures slid 1.4%, while FTSE futures were down 0.6%.

What's behind the Pakistan stock market crash?

The steep decline seen in Pakistan's stock market is due to the conflict in the Middle East and its own border with Afghanistan. Pakistan has seen pro-Iran protests across the country.

According to several media reports, at least 10 people have been killed in the clashes with the police after protesters tried to storm the gates of the US Consulate in the nation’s main port city of Karachi on Sunday.

“The overall tensions in the Middle East have tanked the market along with the pro-Iran protests around the country,” Bilal Khan, head of international equity sales at Karachi-based brokerage Arif Habib, told Reuters.

Additionally, Pakistan is also facing threats from Afghanistan, with the former declaring “open war” with the country as both sides carried out cross-border strikes reaching as far as the Afghan capital and leaving at least hundreds dead.

Pakistan launched operation 'Ghazab Lil Haq' on Thursday night in response to the Afghan Taliban operatives attacking 53 locations along the more than 2,600 km-long border, targeting military installations deep in the country through air strikes.

The KSE-30 index had also declined on Friday amid conflict with Afghanistan, shedding nearly 0.8%. In February, the index had declined as much as 9.10%, snapping its three-month winning streak.

Pakistan stock exchange outlook: Tech view

According to Anshul Jain, Head of Research at Lakshmishree, KSE30 is showing extreme technical weakness after a panic-driven 9.5% single-day decline that forced the price down to test the 50-week moving average near 46,440.

"The velocity of the fall signals distribution rather than routine correction, with momentum across timeframes turning decisively negative. Weekly structure has cracked, and rallies are likely to face supply at declining averages. The next critical downside magnet sits near the 20-month moving average around 41,000, which may offer interim stabilisation," he said.

However, if broader risk aversion persists and this level fails to hold, the path opens toward the 50-month moving average near 33,000. Jain cautioned. "Risk–reward remains skewed sharply to the downside until the index reclaims lost supports with strong participation. Any bounce in the interim should be treated as corrective within a deteriorating higher-timeframe structure."

(With inputs from agencies)

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