After peace talks between the US and Iran failed in Islamabad, US President Donald Trump ordered a naval blockade of Iranian ports. Due to this, huge fluctuations were seen in Pakistan Stock Exchange (PSX). According to a report by *Dawn*, Pakistan’s benchmark KSE-100 index fell sharply during trading on Monday. In early trading, the KSE-100 fell by more than 5,000 points, and at around 9:50 am it hit an intraday low of 161,638.07—well below its previous close of 167,191.37. Later, the index recovered some of its losses; After fluctuating around the 162,000 level, it climbed above 163,000, and touched an intraday high of 163,429.78 around 11:00 am.
Why this turmoil in Pakistani stock market?
After 21-hour long talks in Islamabad, President Trump ordered a naval blockade of Iranian ports. The order came after ceasefire talks failed to reach a consensus and Iran refused to give up its nuclear weapons program. This has increased the fear that supplies through the Strait of Hormuz may be disrupted once again. As a result, investors became worried—a sentiment that also affected other Asian markets such as the Hong Seng and Nikkei.
How important is the Strait of Hormuz for Pakistan?
Pakistan imports about 80–85 percent of its crude oil requirements from Gulf countries like Saudi Arabia, Kuwait, United Arab Emirates (UAE) and Qatar. Additionally, about 99 percent of Pakistan’s LNG supplies come from the UAE and Qatar. If the US naval blockade continues for a longer period, Pakistan’s petroleum import bill could rise from $3.5 billion to $5 billion. If international oil prices rise by $10 per barrel, Pakistan’s annual import bill could rise to between $1.8 billion and $2 billion. As a result, domestic inflation may rise to the range of 15–17 percent. Pakistan is also dependent on imported oil and gas to meet its electricity needs; Any interruption in supply can bring the functioning of various industries to a halt. Apart from this, the duration of power cut may also increase.