Middle East tensions weigh on Colombo bourse as ASPI faces volatility

Amid escalating geopolitical tensions in the Middle East following the Israel–US strikes on Iran, the Colombo Bourse opened the week on a subdued note, extending the cautious sentiment observed in the previous week.

“Rising global oil prices weighed heavily on investor confidence, prompting continued profit-taking and accelerating the decline in the ASPI,” First Capital Research said in their Stock Market weekly review.

This downward pressure was further exacerbated by margin calls, which intensified selling activity. Market turnover remained relatively steady, averaging around LKR 5.0Bn for most of the week.

A brief mid-week recovery emerged as global oil prices showed signs of stabilization, offering some respite to sentiment. However, this rebound proved short-lived, with the market reversing course on Thursday.

Notably, on the final trading day, the ASPI staged a strong recovery, gaining over 376 points to close at 20,640, suggesting opportunistic buying at lower levels and some restoration of investor confidence. From a sectoral standpoint, investor interest was most pronounced in the Banking and Capital Goods sectors.

Looking ahead, the near-term trajectory of the ASPI is likely to remain sensitive to external geopolitical developments, particularly movements in global energy markets.

At the same time, domestic factors, including the risk of power disruptions, potential tariff revisions, and ongoing IMF-related discussions are expected to play a pivotal role in shaping market sentiment and direction.