ISLAMABAD: The Pakistan Stock Exchange (PSX) surged more than 3,500 points on Friday, with analysts attributing the gains to reports of easing tensions between the United States and Iran that are seen as pivotal for regional stability.

The KSE-100 index gained 3,642.50 points or 2.01 percent to close at 185,098.83, up from the previous close of 181,456.33.

The development comes amid public unrest in Iran over worsening economic conditions, with reports suggesting a death toll of over 2,500 and arrests of more than 15,000 people in a government crackdown.

US President Donald Trump has threatened to intervene while encouraging the anti-government protesters to take control of Iranian institutions. However, he softened his stance on Thursday, saying the Iranian authorities had no plans to execute the demonstrators.

“Bullish activity witnessed in the earnings season at PSX amid reports of US-Iran de-escalation,” Ahsan Mehanti, the Chief Executive Officer at Arif Habib Commodities, told Arab News.

“Speculations over further SBP [State Bank of Pakistan] policy easing amid falling government bond yields acted as a catalyst in the bullish close at PSX,” he added.

Earlier on Friday, the US imposed sanctions on five Iranian officials it accused of being behind the crackdown on protests, saying that it was tracking funds of Iranian leaders being wired to international banks.

Pakistan’s stock market has gained momentum in recent months as broad institutional buying has boosted investor confidence amid ongoing economic reforms under international lending programs.

Around 135,000 new investors have joined the PSX over the last 18 months.

Earlier this month, Pakistani stocks climbed to a fresh all-time high with the benchmark KSE-100 Index crossing the 186,000-point mark for the first time ever.