Pakistan Stock Market Halts Trading Amid Escalating US-Iran Tensions

Markets in Pakistan experienced a sharp downturn on March 2, with the KSE-100 index dropping more than 6% within the first hour of trading, prompting a circuit breaker that halted all equity transactions. The sell-off followed violent demonstrations outside the US consulate in Karachi, where protesters set an armored vehicle ablaze on March 1, escalating regional tensions. The unrest coincided with broader global market jitters amid escalating hostilities between the United States and Iran, with oil prices surging in response. The defense sector reacted strongly, with shares of local defense contractors seeing a 12% average decline. Global defense stocks also felt the pressure, as Lockheed Martin (LMT) dropped 3.2% amid concerns over potential supply chain disruptions and increased military spending in volatile regions. Energy markets were similarly impacted, with West Texas Intermediate crude (CL=F) spiking above $89 per barrel, and the energy sector ETF (XLE) rising 4.5% on risk-off sentiment and fears of supply disruptions in the Middle East. The trading halt in Pakistan underscores the fragility of emerging market economies under geopolitical stress. Regional banks and exporters, particularly those reliant on trade with Gulf nations, faced renewed volatility. Investors scrambled to rebalance portfolios, with regional currency volatility increasing as the Pakistani rupee dropped to 308 per US dollar—a level not seen in over a year. The event highlights how localized conflict can trigger cascading effects across energy, defense, and financial markets worldwide. As the situation remains fluid, market participants are closely monitoring diplomatic developments and oil supply routes through the Strait of Hormuz.