PSX benchmark index up 3.0%WoW

Pakistan Stock Exchange (PSX) witnessed bullish sentiments on Monday and the benchmark index gained 7,241 points, led by a pause in US-Iran strikes, which raised hopes of a diplomatic solution and caused oil prices to fall below US$85/bbl. However, with no lasting resolution during the week, the market remained under pressure over the next three trading sessions, before rebounding on Friday to close the week up 5,073 points or 3.0%WoW at 176,094 points.

Sentiments were further supported by positive June 2026 financial results announced by major companies. Meanwhile, SBP’s status quo in its first FY27 meeting on Monday had little impact on the market, as the decision was largely in line with expectations. Additionally, market participation strengthened, with average daily trading rising by 48.5%WoW to 1.3 billion shares.

On the macroeconomic front, foreign exchange reserves held by SBP decreased to US$17.0 billion as of July 24, 2026. Saudi Arabia also rolled over its US$5 billion deposits for another 3 years, reducing external debt repayments to US$21.5 billion for FY27.

Other major news flow during the week included: 1) ECC approves package of export finance incentives, 2) Dar seeks US partnership to double bilateral trade to US$20 billion, 3) PM Shehbaz Sharif approves amendments to Pakistan Oil Refining Policy, 4) Saudi group eyes US$10 billion investment in Pakistan, and 5) Pakistan, Kuwait agree to expand economic ties.

Active sectors were: Jute, Modarabas, and Refinery, while the lagged included: Close-end Mutual Funds, Miscellaneous, and Textile Weaving.

Major buying was recorded by Mutual Funds of US$14.7 million. While sellers were Individuals with US$11.9 million.

Top performing scrips were: AICL, MLCF, PIBTL, KOHC, and IBFL, while laggards included: HGFA, PIOC, PGLC, YOUW, and TPLRF1.

According to AKD Securities, going forward, any positive progress on US-Iran conflict, along with moderating international oil prices towards pre-conflict levels would remain the key focus.

Favorable financial results for the quarter ended June 30, 2026 would support market sentiment in the near term. Market continues to trade at attractive valuations.

Top picks of the brokerage house include: OGDC, PPL, UBL, MEBL, HBL, FFC, ENGROH, PSO, LUCK, FCCL, INDU, ILP and SYS.

Formation of Multinational Maritime Defense Alliance

The founding members of the Multinational Maritime Defense Alliance on Thursday approvedthe establishment of the coalition as a framework for maritime defense cooperation, with Saudi Arabia designated as its founding nation, leader and permanent headquarters.

In a joint statement, the founding states said growing threats to global maritime security require stronger collective cooperation to protect freedom of navigation, international trade routes and global energy supply lines through the Bab al-Mandab Strait, the Red Sea and the Gulf of Aden.

The alliance said it will operate in accordance with international law, United Nations conventions and internationally recognized norms to enhance maritime security, safeguard international shipping and protect shared maritime interests.

The participating countries agreed to establish the alliance's Joint Command, command-and-control centers, Joint Maritime Operations Center and General Secretariat in Saudi Arabia as its principal executive bodies.

The statement reaffirmed the founding members' commitment to the purposes and principles of the UN Charter, international law and globally recognized treaties and norms, describing maritime security as a shared responsibility that requires close coordination to address common and transnational threats.

The participating countries said they will continue completing their domestic legal and constitutional procedures to formally accede to the alliance's charter.

Under the agreement, members will expand cooperation in maritime security, intelligence and information sharing, operational planning, joint exercises, training, capacity building, lessons learned and joint maritime operations in accordance with the alliance's charter.

The statement stressed that the alliance is purely defensive in nature and is not directed against any country, alliance or international organization. It said all activities will be conducted in full compliance with international law, respect for state sovereignty and the protection of freedom of navigation, while participation in alliance activities and operations will remain a sovereign decision for each member state.

The founding members also invited other countries that share the alliance's objectives and principles to join the charter, saying broader participation would strengthen collective maritime security in the Bab al-Mandab Strait, the Red Sea and the Gulf of Aden.

The statement described the alliance as a strategic step toward enhancing maritime security, deepening defense cooperation among its members and supporting regional and global stability, while complementing international efforts to preserve international peace and security.

Earlier on Thursday, Saudi Arabia, Kuwait, Bahrain, Qatar, Pakistan, Türkiye, Egypt, Jordan, Yemen, Bangladesh, Nigeria, Sudan, Djibouti and Somalia endorsed the alliance and welcomed agreement on its founding arrangements, while additional countries expressed support and are completing their national procedures before joining the initiative.

Widening War in the Middle East Could Be a Fatal Mistake for the United States

Five months after the United States and Israel launched military operations against Iran, the conflict has outgrown its original battlefield. What began on February 28 has expanded from Iran and Israel to Iraq, Jordan, Egypt and the Strait of Hormuz, raising the risk of a wider regional war with serious global consequences.

The latest escalation underscores this danger. US and Saudi forces jointly struck Iran-aligned groups in eastern Iraq, marking Riyadh's first publicly acknowledged military operation alongside Washington. Iran retaliated by firing missiles at a US base in Jordan and targeting ships in the Strait of Hormuz, the world's most important energy corridor.

Saudi Arabia's subsequent diplomacy is equally telling. After the joint strikes, Defence Minister Prince Khalid bin Salman met US Vice President JD Vance in Washington and reportedly urged the Trump administration not to expand the conflict by attacking Yemen's Houthis or launching further strikes against Iran-backed militias in Iraq. When even America's closest regional ally urges restraint, Washington should take notice.

The conflict is already spreading. A drone strike on a US-owned gas storage tanker at Egypt's Mediterranean port of Damietta highlighted the vulnerability of regional energy infrastructure. Meanwhile, repeated Iranian missile and drone attacks expose the growing limits of American deterrence. According to the Center for Strategic and International Studies, the United States has fewer than 1,000 Patriot and fewer than 250 THAAD interceptor missiles, raising concerns about sustaining a prolonged regional conflict.

The economic risks are equally serious. Any disruption in the Strait of Hormuz threatens global oil and LNG supplies, pushing up freight costs, insurance premiums and energy prices, with inflationary consequences far beyond the Middle East.

President Donald Trump now faces a crucial choice. He can widen the conflict in pursuit of short-term military gains, or recognize that every new front increases the likelihood of a broader and costlier war.

History shows that great powers often falter not because they lack military strength, but because they underestimate the costs of prolonged conflicts. The widening war in the Middle East could become a fatal strategic mistake for the United States. Statesmanship will be measured not by the number of battles fought, but by the wisdom to prevent a wider regional war.

Strait of Hormuz: A Case for Regional Stewardship

The Strait of Hormuz is the world's most critical energy corridor, carrying nearly one-fifth of global oil and liquefied natural gas supplies. Any disruption in this narrow waterway sends shockwaves through energy markets, raises shipping and insurance costs, and threatens global economic stability. A disappointing fact is that due to decades of external military involvement, the Strait has remained vulnerable to recurring crises.

Recent diplomatic developments offer an opportunity to rethink its security architecture. Iranian Foreign Minister Abbas Araghchi has called for closer regional cooperation, while Oman has proposed establishing a joint maritime mechanism involving Iran and the Gulf states. Inspired by the Strait of Malacca, the proposal envisages voluntary contributions from users of the waterway to finance navigation safety, environmental protection, search-and-rescue operations, and maritime coordination.

The Malacca model demonstrates that strategic waterways can be managed effectively through cooperation among the littoral states. A similar arrangement in the Gulf could bring together Iran, Oman, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Kuwait, and Iraq in a permanent institutional framework dedicated to ensuring safe and uninterrupted navigation.

Such a mechanism would coordinate vessel traffic, strengthen maritime safety, improve emergency response, protect the marine environment, and establish communication channels to prevent misunderstandings from escalating into conflict. More importantly, it would place responsibility in the hands of those with the greatest stake in preserving regional stability.

The economic case is equally compelling. Every Gulf state depends on secure sea lanes for energy exports, trade, and investment. A stable Strait would reduce insurance premiums, lower transportation costs, strengthen investor confidence, and enhance global energy security.

Regional stewardship should not be viewed as excluding the international community. Freedom of navigation is a shared global interest, and countries benefiting from the Strait can continue supporting its operations through voluntary financial contributions, as they do in the Strait of Malacca. Operational responsibility should rest with the littoral states.

The Strait of Hormuz should become a symbol of cooperation rather than confrontation. By establishing a credible regional maritime framework, Gulf nations can safeguard one of the world's most vital trade routes while demonstrating that regional challenges are best addressed through regional leadership, shared responsibility, and sustained diplomatic engagement.

Pakistan's Western Borders Need More Than Military Vigilance

The recent wave of terrorist attacks in Khyber Pakhtunkhwa and Baluchistan is a sobering reminder that Pakistan's western frontier remains one of the country's most complex and persistent security challenges. Every attack claims precious lives, weakens investors’ confidence, disrupts trade, and raises fresh concerns about regional stability. Yet the real question is not merely who carried out these attacks, but why they continue despite years of counterterrorism operations.

Pakistan shares long and difficult borders with Afghanistan and Iran. Rugged terrain, cross-border tribal linkages, and extensive movement of people and goods make these frontiers among the hardest to secure. Border security is not solely a military responsibility; it also demands effective diplomacy, sound governance, and close regional cooperation.

Pakistani authorities have repeatedly expressed concerns that militant groups exploit territory across the western border to launch attacks inside Pakistan. However, an important distinction must be made. The existence of terrorist sanctuaries does not automatically imply state sponsorship. In many border regions, weak administrative control, porous frontiers, criminal networks, and ungoverned spaces can provide militants with opportunities to operate without necessarily reflecting official government policy. Recognizing this distinction is essential for objective analysis and effective policymaking.

At the same time, neighboring countries also bear an important responsibility. Under international law, every state is expected to ensure that its territory is not used for hostile activities against another country. Effective intelligence sharing, coordinated border management, and timely action against militant networks are therefore indispensable for regional peace and stability.

Another dimension deserves equal attention. Pakistan provides the shortest and most economical land route connecting Afghanistan to the Arabian Sea and has the potential to become a vital gateway for regional trade extending into Central Asia and beyond. Persistent instability along these corridors discourages investment, disrupts commerce, and undermines regional connectivity. It is therefore reasonable to ask who ultimately benefits from keeping Pakistan's western border unstable.

Pakistan's response extends beyond kinetic operations. Military action can eliminate terrorists, but lasting peace requires stronger border management, improved governance in border districts, sustained economic development, effective intelligence, and constructive engagement with both Kabul and Tehran. Pakistan's long-term success will depend not only on eliminating terrorists but also on dismantling the political, financial, logistical, and ideological ecosystem that allows them to recruit, regroup, and strike again.

Time for Riyadh to Reassess Its Security Doctrine

For decades, Arab states have been persuaded that Iran poses the greatest threat to their security. Yet the region is arguably less secure today than at any time in recent history. This paradox deserves serious reflection, particularly in Riyadh.

The "Iran threat" narrative has shaped the Middle East's security architecture for more than four decades. Whether entirely justified or deliberately amplified, it has undeniably served several strategic objectives. It reinforced Arab-Iranian hostility, justified a sustained American military presence across the Gulf Cooperation Council (GCC), generated hundreds of billions of dollars in arms sales, and strengthened Washington's political leverage in the region. It also created an environment that facilitated the Abraham Accords, while discussions on US support for Saudi Arabia's civilian nuclear program have, at various stages, been linked to broader regional political considerations, including normalization with Israel.

Despite these arrangements, the Gulf today faces growing uncertainty. The Gaza war, the prolonged confrontation involving Iran and Israel, recurring tensions in the Strait of Hormuz, and instability around the Red Sea have exposed the vulnerability of the region's energy infrastructure and maritime trade routes. Some regional observers argue that these developments risk undermining the Gulf's position as the world's most dependable energy supplier, regardless of who initiates each crisis.

These realities call for a strategic reassessment. Security partnerships should ultimately be judged not by their longevity, but by their ability to deliver peace, stability and economic security.

The China-brokered rapprochement between Saudi Arabia and Iran demonstrated that diplomacy remains a credible alternative to perpetual confrontation. While the agreement did not eliminate longstanding differences, it showed that dialogue can reduce tensions more effectively than escalating military rivalry. Rather than relying exclusively on traditional security partners, Riyadh could broaden its strategic options by deepening cooperation with Beijing, including in the peaceful development of civilian nuclear technology. Given China's substantial economic interests in Gulf stability and its constructive relations with both Saudi Arabia and Iran, Beijing is well placed to facilitate confidence-building measures and encourage regional de-escalation.

Equally important, GCC states should gradually reduce excessive dependence on external military protection and work toward a regional security framework based on dialogue, mutual respect and shared responsibility. Foreign military partnerships may continue to play an important role, but they should complement—not define—the region's long-term security strategy.

History suggests that lasting peace cannot be achieved through military superiority alone. Sustainable security is built on diplomacy, balanced partnerships and regional ownership of regional challenges. For Saudi Arabia, the question is no longer whether its traditional security doctrine has served the Kingdom well. The more important question is whether that doctrine remains the best guarantee of peace and prosperity in an increasingly multipolar Middle East.

PSX benchmark index declines 2.7%WoW

Pakistan Stock Exchange (PSX) remained under pressure during the week ended on July 24, 2026. The benchmark index declined by 4,782 points or 2.7%WoW to close at 171,021 points. The average daily trading volume also declined by 3.2%WoW to slightly more than 881 million shares.  

As reported my Western media, Yemen's Houthis declared a naval blockade on Saudi Arabia and claimed strikes on two Saudi oil tankers in the Red Sea, putting Bab el-Mandeb flows at risk alongside the existing disruption at the Strait of Hormuz. The US carried out strikes on Iranian military targets on twelfth consecutive night.

Brent peaked above US$101/ bbl before easing to US$97, keeping energy import and inflation concerns at the forefront.

Sentiment found some support from S&P Global upgrade of Pakistan's long-term sovereign credit rating to 'B' with a stable outlook, citing stability and reform implementation.

On the macroeconomic front, yields during the T-Bills auction rose across all tenors.

Banking sector deposits increased 15.2%YoY to PKR40.9 trillion in June 2026.

Urea offtakes rose 2%YoY to 592,000 tons, driven by improving farm economics and availability of subsidies and cheaper financing. As against this, DAP sales declined 58%YoY on higher pricing.

Other major news flow during the week included: 1) Pakistan sought a US$10 billion bilateral exchange stabilization facility from the United States, 2) GoP proposed changes to the Brown field Refining Policy, 3) Pakistan purchased a spot LNG cargo at US$21.88/ mmbtu, the highest since March this year, 4) US unveiled new tariffs on 60 trade partners ranging 10-12% including Pakistan, and 5) OGRA decided to set petroleum prices on daily basis under new pricing mechanism.

Top performing sectors were: Refinery, Insurance, and Textile Spinning, while the lagged included: Jute, Sugar & Allied Industries, and Close-end Mutual Fund.

Major selling was recorded by Mutual Funds and Banks of US$31.0 million, while major buyers were Individuals and Foreigners aggregating to US2$2.5 million.

Company-wise, top performers were: YOUW, CNERYGY, PGLC, ATRL, and NESTLE, while laggards included: SSGC, SNGP, KTML, MLCF, and KOHC.

According to AKD Securities, the US-Iran conflict and international oil prices, along with monetary policy announcement would remain the key focus.

Additionally, favorable financial results for the period ended June 30, 2026 would drive the market sentiments in the near term.

Market continues to trade at attractive valuations.

Top picks of the brokerage house include: OGDC, PPL, UBL, MEBL, HBL, FFC, ENGROH, PSO, LUCK, FCCL, INDU, ILP and SYS.