After a sharp decline on Monday, bulls staged a strong comeback at the Pakistan Stock Exchange (PSX) on Tuesday, with investors returning to equities on reports that the door remains open to dialogue between the US and Iran after tense talks in Islamabad, helping to calm concerns over energy prices. The market started on a positive note and the benchmark KSE-100 Index climbed to 165,150.36 during intraday trade, with an increase of 4,559.03 points, partially reversing Monday’s losses. Buying interest was observed across major sectors, including automobile assemblers, cement, commercial banks, fertiliser, oil and gas exploration, oil marketing companies, power generation and refinery.

Index-heavy stocks drove the gains, with HBL, MCB, MEBL, MARI, OGDC, POL, PPL, PSO, HUBCO, PRL and ARL trading in positive territory. At 1:50 pm, the index was at 165,065.37, up 4474.04 points, or 2.79% from the previous close. Market experts linked the rebound to easing global energy pressures, as oil prices retreated from recent highs.

Analysts said the decline in Brent crude from above $100 per barrel reduced the risk of immediate fuel price increases and limited the outlook for inflation, supporting equities. The recovery follows a steep decline on Monday, when the KSE-100 Index dropped 6,600.05 points, or 3.95%, to close at 160,591.33. The sell-off had been triggered by investor concerns after US–Iran talks in Islamabad ended without a deal, alongside fears of disruption to global energy supply.

Analysts described Tuesday’s movement as a short-term stabilisation after a “risk-off” phase, with investors reacting to reduced volatility in oil markets and continued diplomatic engagement. Despite the rebound, market participants remain cautious, with Middle East developments and energy price movements expected to continue influencing investor sentiment in the near term. Reuters reported, citing 11 sources familiar with the talks, that dialogue between the US and Iran was still alive.

Pakistani Prime Minister Shehbaz Sharif also said efforts were still underway to resolve the conflict. U.S. President Donald Trump said Iran had “called this morning” and that “they’d like to work a deal.” However, the U.S. military began a blockade of Iran’s ports, angering Tehran and adding uncertainty around the crucial waterway, although hopes for dialogue to end the war provided some relief to ​oil markets, where benchmark prices fell below $100 on Tuesday.

Globally, equity markets in Asia advanced while oil prices and the safe-haven dollar fell on Tuesday as investors banked on a resolution ​to the Middle East war, even as the U.S. blocked Iran’s ports after the collapse of peace talks over the weekend. Investors latched on to hopes for an off-ramp, lifting the overall ​market mood and sending MSCI’s broadest index of Asia-Pacific shares outside Japan up nearly 2%, while Japan’s Nikkei rose more than 2%. Nasdaq futures advanced ​0.2% while S&P 500 futures held steady, following an overnight rally on Wall Street, while EUROSTOXX 50 futures gained 0.41% ⁠and DAX futures added 0.6%.

Oil prices slid as expectations for further dialogue to end the war outweighed concerns over supply disruptions, leaving Brent crude futures down 1.5% at $97.90 a barrel. U.S. crude futures fell 2.3% to $96.78 per barrel.