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The Pakistan Stock Exchange (PSX) was forced to halt trading on Thursday after a massive selloff dragged the KSE-30 index down 7.2 per cent in intraday trade. The sharp correction followed a series of retaliatory strikes by India on Pakistani air defence systems, in response to attempted military engagements in Northern India.

The KSE-30, which had already declined nearly 3 per cent on Wednesday, hit circuit limits early in the day. The broader KSE-100 index also plunged 6.3 per cent before trading was suspended.

According to PSX norms, such steep declines trigger market-wide halts to prevent panic-induced liquidation. The situation was further compounded by reports of a blast in Lahore on Thursday morning, heightening investor concerns over escalating conflict between the two nuclear-armed neighbours.

On Thursday morning, India's Ministry of Defence confirmed that Indian armed forces had successfully neutralised air defence radars and missile sites at multiple Pakistani locations. This came as a direct retaliation to what India called an unprovoked attempt by Pakistan to target Indian military establishments.

“Pakistan has intensified unprovoked firing along the LoC in areas such as Uri, Rajouri, and Baramulla,” the Indian defence ministry said, reiterating that Indian forces remain committed to non-escalation if provoked no further.

Since the Pahalgam terror attack, the KSE-30 index has lost 14.2 per cent, reflecting growing unease over the political and economic fallout of continued cross-border hostilities. In contrast, Indian markets have largely held their ground.

The BSE Sensex closed Thursday with a 0.5 per cent drop, while the NSE Nifty50 dipped 0.58 per cent. Despite the spike in the India VIX to 21.4, indicating elevated volatility, Indian investors remained broadly calm, banking on a limited escalation.

With no clear signs of de-escalation and rising military exchanges at the LoC, analysts expect Pakistani equities to remain under pressure. Foreign investors are likely to stay on the sidelines until greater clarity emerges on the geopolitical front.

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