Pakistan’s financial markets staged a powerful rebound as the Karachi Interbank Offered Rate (KIBOR) declined across all maturities, reflecting a sharp improvement in investor sentiment following a major diplomatic breakthrough in the Middle East.

The three-month benchmark rate posted the biggest drop, sliding 26 basis points. The six-month and one-year tenors also eased significantly, falling by 18 and 16 basis points respectively, indicating reduced stress in the local lending environment and improved liquidity expectations.

Analysts said the decline signals the rapid removal of the geopolitical risk premium that had recently pushed borrowing costs higher, as markets begin to anticipate a period of relative regional calm.

The upbeat mood was mirrored at the Pakistan Stock Exchange, where the benchmark KSE-100 Index recorded one of the strongest sessions in its history. The index surged by 12,920.93 points, registering an extraordinary 8.52 percent gain and triggering widespread optimism among investors.

The rally followed reports that US President Donald Trump delayed a planned military strike on Iran for two weeks to allow space for urgent negotiations aimed at achieving a broader ceasefire and reopening the Strait of Hormuz — a development expected to ease global energy risks.

Prime Minister Shehbaz Sharif confirmed Pakistan’s role in facilitating dialogue between Washington and Tehran, announcing that Islamabad will host high-level delegations from both countries for decisive negotiations.

He expressed optimism that the temporary de-escalation could evolve into a sustainable peace framework, a move economists believe may help stabilize Pakistan’s economic outlook, lower financing costs, and reinforce confidence across financial markets.

Tenor	Bid (%)	Ask (%)	Change (%)
1 Week	10.38	10.88	-0.03
2 Week	10.38	10.88	-0.03
1 Month	10.58	11.08	-0.02
3 Month	11.17	11.42	-0.26
6 Month	11.36	11.61	-0.18
9 Month	11.46	11.96	-0.17
1 Year	11.50	12.00	-0.16