The Pakistan Stock Exchange (PSX) experienced a significant rally on Thursday as investor sentiment soared following the announcement of a key trade and energy agreement between the United States and Pakistan. The KSE-100 index jumped 978.17 points, or 0.71%, closing at 139,390.42, marking one of the strongest sessions in recent weeks.
Market participants responded positively to the announcement of lower tariffs on Pakistani exports to the US and a planned partnership to explore and develop Pakistan’s untapped oil reserves.
US President Donald Trump, through a social media post on Wednesday, confirmed the bilateral breakthrough.
“We have just concluded a Deal with the Country of Pakistan, whereby Pakistan and the United States will work together on developing their massive Oil Reserves,” he posted.
He further mentioned that the process of selecting the oil company to lead this joint venture was already in motion.
Although detailed terms of the agreement have yet to be released, the announcement alone was enough to fuel a strong rally in the stock market, reflecting increased investor confidence.
In a video message released Thursday, Finance Minister Muhammad Aurangzeb hailed the development as a milestone in US-Pakistan strategic relations.
“We are in a good place today in Pakistan, in terms of where we have arrived before August 1. We have come a long way in terms of our overall strategic partnership between Pakistan and the United States.”
Aurangzeb noted that Pakistan was previously at risk of facing a 29% tariff on its exports to the US, part of a broader tariff policy announced by Washington in April. These proposed tariffs were suspended for 90 days to allow for negotiations, which ultimately resulted in the latest deal.
Even before the trade announcement, the PSX was showing signs of recovery. On Wednesday, the State Bank of Pakistan (SBP) held its policy interest rate steady at 11%, a move that reassured both local and foreign investors. Following the SBP announcement, the KSE-100 index gained 447.43 points, rising from 137,964.82 to 138,412.25.
Thursday’s rally, fueled by geopolitical and economic optimism, provided a double boost to market sentiment, pushing the index even higher.
Data from the Office of the United States Trade Representative (USTR) shows that total goods trade between the two countries reached $7.3 billion in 2024, compared to $6.9 billion in 2023. The US trade deficit with Pakistan grew to $3 billion, representing a 5.2% year-on-year increase.
This consistent growth in bilateral trade reinforces the importance of stable economic diplomacy. Key sectors such as textiles, agriculture, leather goods, and sporting equipment stand to benefit the most from reduced US tariffs.
While PSX climbed, global markets had a more cautious outlook. In Asia, equities slipped after disappointing Chinese activity data and a steep decline in copper prices. The MSCI Asia-Pacific Index (excluding Japan) fell 0.7%, though it was still on track for its fourth consecutive monthly gain in July.
On Wall Street, however, sentiment remained upbeat. Nasdaq futures jumped 1.2% after strong earnings reports from Microsoft and Meta Platforms. The S&P 500 futures rose 0.8%, buoyed by these results. Meanwhile, the US dollar held steady near a two-month high, supported by the Federal Reserve’s decision to keep interest rates unchanged.
If implemented successfully, the energy partnership with the US could be a game-changer for Pakistan’s struggling oil and gas sector. It may reduce reliance on imported fuels, improve foreign exchange reserves, and potentially create thousands of jobs in the energy and related industries.
Simultaneously, lower tariffs will give Pakistani exporters an edge in the US market, helping them remain competitive in vital export categories.
With investor confidence on the rise, analysts expect continued bullish momentum in the coming weeks. The finalization of energy agreements and further trade facilitation could offer long-term benefits for both economies.
If managed with transparency and efficiency, the US-Pakistan trade and oil partnership could serve as a cornerstone of economic diplomacy, reshaping Pakistan’s role in regional and global markets.
