Due to rising tensions between India and Pakistan, investor confidence is being negatively impacted, and Pakistan's dollar bonds and stocks are on track for their worst monthly performance since 2023.

This month, dollar bonds have declined by roughly 4%, while stocks have dropped by nearly 3%. Indian assets, on the other hand, are mostly untouched; this month, both equities and local bonds have seen gains.

According to a Bloomberg article, Pakistani stocks performed worse in April than regional markets, while the currency and dollar bonds fell amid possible tensions with India.

India would launch military operations within 24 to 36 hours, according to Pakistan's Information Minister, Attaullah Tarar, who also said that Pakistan would react confidently and forcefully.

The terror attack in the Jammu and Kashmir region on April 22, which claimed 26 lives, deteriorated relations between these nuclear-armed countries.

Thomas Hugger, the CEO and fund manager of Asia Frontier Capital Ltd. in Hong Kong stated that since the US tariffs are an overhang and the prognosis is unclear for the foreseeable future, we should anticipate more minor deterioration.

He went on to say that a decrease in tensions will inevitably allay investors' worries about the fragile ties between the two countries getting worse, which may result in slight increases in bond and equity markets.

Before this event, Pakistan's investment prospects were being enhanced by declining oil prices and improved credit ratings. The Bloomberg report claims that the stock market had reached its highest annual performance in 22 years, which paved the way for future growth as the nation's economy expanded.