Pakistan's benchmark stock index plummeted on Friday, February 27, 2026, as escalating military tensions with neighboring Afghanistan led Pakistan's Defence Minister to declare an "open war." The KSE-100 index plunged by over 3,000 points, or around 1.82%, during early trading, reflecting widespread investor concern over the rapidly deteriorating security situation.The index touched an intraday low of 165,811.87 before recovering some losses to close down 830.92 points, or 0.49%, at 168,062.16.This sharp decline followed a series of cross-border attacks and retaliatory airstrikes between the two nations.[profit+25]
Escalating Border Hostilities
The market volatility directly stemmed from a significant escalation in the long-standing border conflict between Pakistan and Afghanistan. On Friday, February 27, Pakistan's Defence Minister Khawaja Asif announced an "open war" against the Afghan Taliban government, stating that Pakistan's patience had reached its limit.This declaration came after Pakistan launched airstrikes in Afghanistan's capital, Kabul, and two other provinces, Paktia and Kandahar, early on Friday.[thehindu+19]
Pakistan's military operation, dubbed "Operation Ghazab lil Haq" (Righteous Fury), was a direct response to cross-border attacks by Afghan forces on Thursday night.Pakistani officials claimed these strikes successfully targeted militant camps belonging to the Pakistani Taliban (TTP) and the Islamic State – Khorasan Province (ISIS–K), which Pakistan blames for recent terrorist attacks within its borders. Information Minister Attaullah Tarar stated that Pakistan's security forces killed at least 133 Afghan Taliban operatives and injured more than 200 in these retaliatory strikes. Other reports indicated higher casualties, with Pakistan's military claiming over 274 Taliban regime operatives and terrorists killed and more than 400 injured.[thehindu+10]
Afghan officials, however, condemned Pakistan's airstrikes as violations of its sovereignty. Afghanistan's Defence Ministry reported that 55 Pakistani soldiers were killed in Thursday's border clashes, with eight Afghan soldiers also losing their lives and 11 wounded. They also claimed the destruction of 19 Pakistani army posts and two bases. TheTaliban government spokesperson, Zabihullah Mujahid, stated that Afghanistan carried out "large-scale offensive operations" against the Pakistani military along the Durand Line.[brecorder+6]
Investor Confidence Shaken
The rapid escalation of hostilities immediately rattled investor confidence in the Pakistan Stock Exchange. Avinash Gorakshkar, a SEBI-registered fundamental equity analyst, attributed the KSE-100 index's fall to the "escalation of buzz over the Pakistan-Afghanistan war." Topline Securities, a brokerage house, noted that the market's negativity was due to "regional tension with Afghanistan, where Pakistan targeted key military installations of the Afghan Taliban regime in Kabul."[livemint+2]
Many investors adopted a defensive stance, leading to broad-based selling across major sectors. Commercial banks, oil and gas exploration companies, cement, fertilizer, automobile assemblers, and power generation and refinery sectors all experienced significant losses. Heavyweight stocks like United Bank Limited (UBL), Fauji Fertilizer Company (FFC), Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), and MCB Bank contributed significantly to the index's decline, cumulatively shaving off 658 points. Themarket did see some recovery later in the day, as no immediate retaliatory strikes from Afghanistan were reported, leading to some value buying and short covering by traders.[brecorder+17]
Broader Economic Impact and Future Concerns
Beyond the stock market, the renewed conflict poses serious threats to Pakistan's broader economy. The sharp rise in tensions has already led to the suspension of trade ties and the closure of major border crossings, including Torkham and Chaman. These closures have severely disrupted economic activity on both sides of the 2,600-kilometer border.[sundayguardianlive]
Analysts warn that if tensions persist, the country could face broader financial consequences. This includes potential delays in upcoming Initial Public Offerings (IPOs). Twoprominent investment banks, Arif Habib Ltd. and Ktrade Securities Ltd., have a combined pipeline of up to 16 IPOs planned for the next seven months. This number is significantly higher than the 11 listings seen in Pakistan over the past three years. Shahid Ali Habib, CEO of Arif Habib, noted that current market valuations were attractive for raising equity, with stability in the Pakistani rupee and a favorable interest-rate environment providing strong tailwinds for capital markets. However, continued hostilities could jeopardize these plans.[sundayguardianlive+10]
The disruption of trade routes has also caused prices of many essential goods to surge in Pakistan, particularly vegetables and fruits that rely on cross-border movement. Tomatoes, for example, have seen price increases of over 400%, reaching nearly 600 Pakistani Rupees ($2.13) per kilogram in some markets. Apples and grapes imported from Afghanistan are also selling at much higher rates. This situation raises concerns about increasing food insecurity in both Pakistan and Afghanistan. TheKSE-100 Index has delivered a lackluster performance throughout February 2026, losing 16,112 points for the month, marking an 8.7% negative return, its largest monthly drop since March 2020. This monthly downturn is attributed to geopolitical tensions, foreign selling pressure, and disappointing corporate earnings.[news9live+6]
The current conflict adds to a challenging economic environment for Pakistan. Investors and citizens alike will be closely watching for any de-escalation or further developments in the coming days.[brecorder+1]
