US Iran Conflict Dampens Hopes of a Pakistan Rate Cut: Bank and Cement Stocks in Focus

A survey by brokerage Topline Securities found that 97% of market participants expect the State Bank of Pakistan's Monetary Policy Committee to leave its policy rate unchanged at 11.5% when it meets on July 27, with only 3% expecting a 100 basis point cut. The main reason cited is not domestic inflation, which the survey says has stayed broadly contained, but the renewed US Iran conflict, which has pushed international oil prices higher and revived worries about imported inflation and Pakistan's external account.

What the Topline Securities Survey Found on Pakistan's Rate Outlook

Topline's own house view matches the survey: it expects the central bank to hold rates steady, arguing that the recent rebound in oil prices calls for a cautious approach before any further easing. A month ago, expectations for the rate path had been shifting toward cuts as inflation cooled, but the reignited Iran US conflict has changed the calculus by raising the price of crude Pakistan has to import, which threatens to push inflation back up and adds pressure on the current account. That is enough for the State Bank to prefer waiting rather than cutting into that uncertainty.

Why Bank and Cement Stocks Are in Focus Ahead of July 27

The policy rate is one of the cleanest levers connecting SBP decisions to specific PSX sectors. Banks earn more on their loan books and government bond holdings when rates stay high, so every meeting that ends without a cut extends the higher margin environment they have enjoyed through this cycle. Cyclical, debt heavy sectors sit on the other side of that trade: cement makers and other capital intensive businesses benefit when borrowing costs fall, since it lowers their own financing costs and can support construction demand, so a delayed cut also delays that relief for them.

Which Stocks, and Why

Habib Bank, United Bank and Meezan Bank are among the banks whose net interest margins benefit from rates staying at 11.5% rather than being cut, since a large share of their earnings comes from the spread between what they pay depositors and what they earn on loans and government securities. On the other side, Lucky Cement and D.G. Khan Cement carry meaningful debt and rely on construction activity that responds to financing costs, so a further delay in rate cuts means their own borrowing costs stay elevated for longer. Indus Motor Company faces a similar drag, since car buyers depend heavily on auto financing, and a higher policy rate keeps those loans more expensive.

What to Watch

The Monetary Policy Committee decision on July 27 is the immediate event that will confirm or override this survey. Beyond that, the path of international oil prices tied to the US Iran conflict is the variable to track, since a de escalation that brings oil prices back down would revive the case for a cut at a later meeting, while a further escalation would likely harden the central bank's cautious stance.