The recent terror attack in Pahalgam on April 22, 2025, which resulted in the deaths of 26 people has placed a massive burden on India-Pakistan diplomatic and economic relations. India, as a retaliatory measure, has taken drastic steps, such as suspension of the Indus Waters Treaty, suspension of bilateral trade, and downsizing of diplomatic staff. These have directly led to India Pakistan market fluctuations, especially in Pakistan.
Pakistan’s Stock Market Crash
After the Indo Pak terror attacks, Pakistan’s KSE-100 index surged by a record value. Down by more than 7,100 points during the tenure of April 23 to April 30. On April 30 alone, it fell down to 3,545 points, one of its worst performance ever. Its leaders such as LUCK, ENGROH, UBL, PPL, and FFC were the biggest losers.
India’s Economic Actions Against Pakistan
India took drastic steps, including:
Indus Waters Treaty suspension, affecting water-sharing agreement.
Attari Integrated Check Post closure, impacting trade routes.
Pakistani imports, which includes direct Pakistani imports and that come through third-party countries.
Keeping Pakistani ships away from Indian ports.
Disruptions in the Airline Industry
The air transport sector was also affected, with prominent foreign airlines like Lufthansa and Air France rerouting to avoid Pakistani airspace. India shut its skies to Pakistani aircraft, and Pakistan prohibited Indian flights3.
Official Statements
Indian officials again claimed these actions are imminent in an effort not to jeopardize cross-border terror and security risks. In the meantime, Pakistan’s Ambassador to Washington, D.C., Rizwan Saeed Sheikh, has made a plea to the international community to step in and ease tensions.
Future Outlook
Even as Pakistan’s exchange recovered temporarily on May 2, up by 2,785 points, analysts caution that the economic slowdown may continue unless relations between countries improve. IMF and World Bank have already reduced Pakistan’s growth rate estimate for the year due to volatility.
The crisis again highlights the weakness of India-Pakistan economic ties, where markets go haywire while reacting to geopolitics.
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