Pakistan stocks plummet on fears of mounting tensions between Islamabad and Iran

In this photo, taken on December 29, 2023, workers interact outside the Pakistan Stock Exchange in Karachi. (AN Photo/File)
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Updated 18 January 2024
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Pakistan stocks plummet on fears of mounting tensions between Islamabad and Iran

  • Pakistan’s equity market closed bearish after losing as much as around 1,000 points during intraday trading
  • Analysts say future market direction will be determined by world response to Pak-Iran strikes

KARACHI: Pakistan’s equity market on Thursday closed bearish after losing as much as around 1,000 points during intraday trading, stock traders and analysts said, as tensions escalated between Pakistan and Iran following airstrikes by both countries in each other’s territory.

Iran this week conducted an airstrike against alleged militant bases in Pakistan’s southwestern Balochistan province. Islamabad said the strike killed two children in a border village. The Pakistan military on Thursday retaliated with multiple strikes in Iran’s Sistan-Baluchestan province in an intelligence-based operation that the Pakistani foreign ministry said targeted “terrorist hideouts.”

Reacting to the mounting tensions, the benchmark KSE 100 index of the Pakistan Stock Exchange (PSX) lost more than 364 points to close at the 63,202 level at closing. 

During trading, the market was down by around 1,000 points in the early trading hours but it recouped some of the losses before closing on the back of strong economic data.

Muhammad Sohail, chief executive officer of Karachi-based brokerage firm Topline Securities, attributed the drop to panic among investors over the cross-border strikes.

“Yesterday, it was expected that there will be no retaliation from Pakistan, but after the retaliatory strikes, the market is cautious and investors are selling shares,” Sohail told Arab News.

Pakistan and Iran have in the past had rocky relations, but the strikes are the highest-profile cross-border intrusion in recent years.

On Wednesday, Islamabad recalled its ambassador from Iran and barred Tehran’s envoy, who is in Iran, from returning to Pakistan.

Sohail said traders feared investing in stocks as the tensions between the two countries appeared to be escalating rather than deescalating.

“The market will set its future direction in the next few days, depending upon the reaction of the international community,” he added.

Ahsan Mehanti, CEO of Arif Habib Corporation, said amid fears of escalating tensions between Pakistan and Iran, late session support came from the strong economic data:

“Strong data on $863 million foreign Direct Investment (FDI), UAE rollover of $2 billion deposit for a year, and $397 million Current Account Surplus in December 2023 invited late session support.”


‘Look ahead or look up?’: Pakistan’s police face new challenge as militants take to drone warfare

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‘Look ahead or look up?’: Pakistan’s police face new challenge as militants take to drone warfare

  • Officials say militants are using weapons and equipment left behind after allied forces withdrew from Afghanistan
  • Police in northwest Pakistan say electronic jammers have helped repel more than 300 drone attacks since mid-2025

BANNU, Pakistan: On a quiet morning last July, Constable Hazrat Ali had just finished his prayers at the Miryan police station in Pakistan’s volatile northwest when the shouting began.

His colleagues in Bannu district spotted a small speck in the sky. Before Ali could take cover, an explosion tore through the compound behind him. It was not a mortar or a suicide vest, but an improvised explosive dropped from a drone.

“Now should we look ahead or look up [to sky]?” said Ali, who was wounded again in a second drone strike during an operation against militants last month. He still carries shrapnel scars on his back, hand and foot, physical reminders of how the battlefield has shifted upward.

For police in the northwestern Khyber Pakhtunkhwa (KP) province, the fight against militancy has become a three-dimensional conflict. Pakistani officials say armed groups, including the Tehreek-e-Taliban Pakistan (TTP), are increasingly deploying commercial drones modified to drop explosives, alongside other weapons they say were acquired after the US military withdrawal from neighboring Afghanistan.

Security analysts say the trend mirrors a wider global pattern, where low-cost, commercially available drones are being repurposed by non-state actors from the Middle East to Eastern Europe, challenging traditional policing and counterinsurgency tactics.

The escalation comes as militant violence has surged across Pakistan. Islamabad-based Pakistan Institute for Conflict and Security Studies (PICSS) reported a 73 percent rise in combat-related deaths in 2025, with fatalities climbing to 3,387 from 1,950 a year earlier. Militants have increasingly shifted operations from northern tribal belts to southern KP districts such as Bannu, Lakki Marwat and Dera Ismail Khan.

“Bannu is an important town of southern KP, and we are feeling the heat,” said Sajjad Khan, the region’s police chief. “There has been an enormous increase in the number of incidents of terrorism… It is a mix of local militants and Afghan militants.”

In 2025 alone, Bannu police recorded 134 attacks on stations, checkpoints and personnel. At least 27 police officers were killed, while authorities say 53 militants died in the clashes. Many assaults involved coordinated, multi-pronged attacks using heavy weapons.

Drones have also added a new layer of danger. What began as reconnaissance tools have been weaponized with improvised devices that rely on gravity rather than guidance systems.

“Earlier, they used to drop [explosives] in bottles. After that, they started cutting pipes for this purpose,” said Jamshed Khan, head of the regional bomb disposal unit. “Now we have encountered a new type: a pistol hand grenade.”

When dropped from above, he explained, a metal pin ignites the charge on impact.

Deputy Superintendent of Police Raza Khan, who narrowly survived a drone strike during construction at a checkpoint, described devices packed with nails, bullets and metal fragments.

“They attach a shuttlecock-like piece on top. When they drop it from a height, its direction remains straight toward the ground,” he said.

TARGETING CIVILIANS

Officials say militants’ rapid adoption of drone technology has been fueled by access to equipment on informal markets, while police procurement remains slower.

“It is easy for militants to get such things,” Sajjad Khan said. “And for us, I mean, we have to go through certain process and procedures as per rules.”

That imbalance began to shift in mid-2025, when authorities deployed electronic anti-drone systems in the region. Before that, officers relied on snipers or improvised nets strung over police compounds.

“Initially, when we did not have that anti-drone system, their strikes were effective,” the police chief said, adding that more than 300 attempted drone attacks have since been repelled or electronically disrupted. “That was a decisive moment.”

Police say militants have also targeted civilians, killing nine people in drone attacks this year, often in communities accused of cooperating with authorities. Several police stations suffered structural damage.

Bannu’s location as a gateway between Pakistan and Afghanistan has made it a security flashpoint since colonial times. But officials say the aerial dimension of the conflict has placed unprecedented strain on local forces.

For constables like Hazrat Ali, new technology offers some protection, but resolve remains central.

“Nowadays, they have ammunition and all kinds of the most modern weapons. They also have large drones,” he said. “When we fight them, we fight with our courage and determination.”