Karachi Stock Exchange Crashes Over 6% as Indo-Pak Tensions and Fed Uncertainty Rattle Asia FX

 

The Karachi Stock Exchange plunged over 6% amid rising Indo-Pak tensions and investor caution ahead of the US Fed meeting, dragging Asian currencies lower despite US-China trade optimism.

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Karachi Stock Exchange Crashes Over 6% as Indo-Pak Tensions and Fed Uncertainty Rattle Asia FX

The Karachi Stock Exchange (KSE-100) suffered a dramatic selloff today, plunging over 6% as geopolitical tensions between India and Pakistan surged following India’s military strikes under "Operation Sindoor." The sharp drop in Pakistan’s equity benchmark reflected widespread investor panic, a sentiment echoed across Asian FX markets already bracing for monetary policy signals from the US Federal Reserve.

KSE-100 Index Tumbles as Geopolitical Risks Mount

Pakistan’s KSE-100 index dropped by more than 6,200 points, down 5.5% intraday, hitting a low of 107,296.64. The fall was sparked by India’s coordinated strikes on nine terror-linked targets across Pakistan and Pakistan-occupied Kashmir in retaliation for the April 22 Pahalgam terror attack. Investors quickly fled Pakistani equities amid fears of further escalation and economic instability, marking one of the steepest one-day declines in recent years.

Contagion Hits Asian FX as Risk Appetite Evaporates

The spillover effect was quickly visible across Asian foreign exchange markets. Currencies such as the Indian Rupee, Pakistani Rupee, and Thai Baht weakened as regional risk appetite dried up. The rupee saw moderate losses, cushioned by India’s relatively stable equity market performance, but investor anxiety was palpable.

Indian Markets Stay Steady, Showing Resilience

While the Karachi crash dominated headlines, Indian stock markets remained comparatively stable. The Sensex dipped by just 0.3% and the Nifty by 0.37%, as domestic investors appeared reassured by India’s decisive but calculated military posture. However, foreign flows remained cautious, awaiting further developments both on the border and from the US monetary front.

Fed Meeting Weighs on Global Sentiment

Adding to the uncertainty is the looming US Federal Reserve meeting. Global investors are on edge as markets await clues on future interest rate moves. Any signal of prolonged higher rates could tighten liquidity in emerging markets, putting further downward pressure on Asian currencies and equities.

US-China Trade Talks Offer Little Relief

Although there has been some positive momentum in US-China trade talks, the broader market reaction suggests these developments are being overshadowed. The heightened geopolitical risks and Fed policy jitters are currently the dominant forces shaping investor behavior.

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Conclusion

Today’s 6% crash in the Karachi Stock Exchange is a stark reflection of investor anxiety over escalating Indo-Pak tensions and broader global uncertainties. While Indian markets held their ground, the regional outlook remains fragile. The combination of geopolitical volatility and US monetary policy uncertainty is likely to keep Asian markets, especially frontier economies like Pakistan, under pressure in the near term.

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