India’s military operation ‘Operation Sindoor,’ targeting terror camps in Pakistan and Pakistan-occupied Kashmir (PoK), has caused major panic in Pakistan’s financial markets. On May 7, the Karachi Stock Exchange’s benchmark KSE-100 index plunged as much as 5.7 per cent during intra-day trading—the biggest fall since 2021.
What Triggered the Crash?
The KSE-100 index saw a sharp decline in the opening hours, losing 5.7 per cent. In April 2025 alone, the index dropped over 6 per cent, marking its worst monthly performance since August 2023. Year-to-date (YTD), the index is down 1.1 per cent, a sharp contrast to 2024, when it had surged by an impressive 86 per cent.
Investor Confidence Hit by Geopolitical Tensions
The Indian military action has raised fears of heightened conflict along the border. Investors—both foreign and domestic—are rattled by the possibility of further escalation and rising economic and political instability in Pakistan. The country’s 48-hour airspace closure has further disrupted logistics and trade flows.
From Star Performer to Crisis Zone
In 2024, Pakistan’s stock market was a global standout, with the KSE-100 posting its best annual return in 22 years (84 per cent). The rally was fueled by an IMF bailout, lower inflation, and a sovereign credit rating upgrade. Major international investment firms like BlackRock and Eaton Vance had increased their exposure to Pakistan.
Indian Markets Stay Calm
Despite the cross-border military tensions, India’s Sensex and Nifty 50 remained largely stable. After a minor early dip, both indices recovered, showing investor confidence and strategic clarity in the Indian economy.
India’s precise military action not only struck terror infrastructure but also shook the foundations of Pakistan’s economic stability. The steep fall in the KSE-100 highlights pre-existing investor anxiety, which quickly turned into widespread selling under military pressure.
