The Pakistan Stock Exchange (PSX) rose by 1,700 points on Thursday to settle near the all-time high of 158,000 on the back of increased investor confidence after the signing of a mutual defence pact with Saudi Arabia.

The benchmark KSE-100 index surged by 1,775.65 points, or 1.14 per cent, to close at 157,953.46 — its highest level in history.

Pakis­tan and Saudi Arabia entered into a landmark mutual defence agreement, under which any aggression against one state will be considered an attack on both. The ‘Strategic Mutual Defence Agreement’ was signed by Prime Minister Shehbaz Sharif and Saudi Crown Prince Mohammad Bin Salman at the Al-Yamamah Palace in Riyadh on Wednesday.

Talking to Dawn.com, Awais Ashraf, research director at AKD Securities, said the pact had “bolstered investor confidence”, driving the KSE-100 Index to an all-time high close with the second-highest trading volumes in today’s session.

“This agreement is expected to pave the way for enhanced cooperation with Saudi Arabia, including greater export of skilled labour and increased prospects for investment across various sectors of Pakistan.”

According to the text of the joint statement, issued simultaneously by Islamabad and Riyadh at the end of PM Shehbaz’s day-long state visit, the pact “reflects the shared commitment of both nations to enhance their security and to achieve security and peace in the region and the world”.

“[It] aims to develop aspects of defence cooperation between the two countries and strengthen joint deterrence against any aggression,” the statement said, without going into details.

Importantly, the text underscored that “any aggression against either country shall be considered an aggression against both”.

The timing of the accord, coming on the heels of an Arab summit that signalled a shift towards collective security — in the wake of Israel’s attack on Qatar — hints that it is rooted in current world affairs and reflects the defence concerns of both countries.

The agreement marks the most significant upgrade in Pakistan-Saudi defence ties in decades. Cooperation between the two states dates back to 1967 and deepened after the 1979 Grand Mosque seizure, when Pakistani special forces helped Saudi troops reclaim Masjid al-Haram.

In 1982, the two sides institutionalised security ties through a Bilateral Security Cooperation Agreement that enabled Pakistani training, advisory support and deployments on Saudi soil. At times, as many as 20,000 Pakistani troops were stationed in the kingdom, and Saudi Arabia became a key purchaser of Pakistani-made arms.

In recent years, the partnership has gained urgency amid regional instability. In Feb, a meeting of the Joint Military Cooperation Committee in Riyadh pledged to expand training and exchanges.

The new pact formalises commitments that had long existed in practice, creating what some analysts saw as a de facto joint defensive umbrella though finer details of the agreement were not made public.

For Pakistan, the agreement offers both strategic and economic benefits. It secures vital Saudi investment and funding at a time of fiscal strain, while reinforcing Islamabad’s standing as a pan-Islamic security provider.

For Saudi Arabia, it strengthens defences against threats from Iran, Houthi militias and regional turbulence caused by Israel’s genocidal actions in Gaza and aggression against other countries in the neighbourhood. The Israeli attack targeting Hamas delegation in Doha heightened the urgency for this agreement that had been under discussion for some time.

Pakistan’s earlier defence alignments, such as Cold War-era agreements with the United States and those under Seato and Cento, have long since eroded. Islamabad’s partnerships with China, Turkiye and other Gulf states remain important but lack binding mutual defence clauses.

Against this backdrop, Wednesday’s signing represented Pakistan’s most consequential formal defence commitment in decades, tying its security role inextricably to the evolving strategic architecture of the Gulf.