On April 22, 2025, a horrific terrorist attack in Baisaran Valley close to Pahalgam, Jammu and Kashmir, killed 26 tourists and left more than 20 others injured. The Resistance Front (TRF), a splinter group of the Pakistan-based Lashkar-e-Taiba, took responsibility for the attack, which was on Hindu tourists, reportedly against demographic shifts in the area. This incident not only has raised tensions between Pakistan and India but also sent waves across world markets and evoked fears of regional instability.
The Attack and Its Immediate Aftermath
The militants, who were armed with AK-47s and M4 carbines, moved into the secluded Baisaran Valley, a tourist hotspot accessible only by horse or on foot. Witnesses said the militants separated men from women and children and targeted the men for their inability to recite Islamic prayers. Some of the survivors escaped by reciting Islamic prayers they learned as children. This attack is the deadliest in India since the 2008 Mumbai attacks.
India’s Response: Diplomatic and Strategic Measures
India responded to the attack with a number of major steps:
- Suspension of the Indus Waters Treaty: India immediately suspended the 1960 Indus Waters Treaty that regulates the division of water from the Indus river system between the two nations. Although India’s limited storage facilities imply no short-term change to water flows, suspension means India can deny critical hydrological data, which brings major uncertainty to Pakistan’s agriculture industry.
- Closing of the Wagah-Attari Border: India’s only road crossing from Pakistan was closed, stopping sparse trade and people-to-people interactions.
- Diplomatic Evictions: Indian diplomats were asked to leave and its military advisors were pulled back from Islamabad. Also, all Pakistani nationals who held SAARC visas were told to depart from India within 48 hours.
Pakistan’s Reaction
Pakistan denounced the attack but not their involvement, blaming internal insurgencies in India. In response to India’s actions, Pakistan:
- Closed Airspace to Indian Airlines: Pakistan closed its airspace to Indian carriers, affecting flight routes and prolonging travel time.
- Suspended Bilateral Trade and Visas: All bilateral trade was suspended, and visas given to Indian citizens were cancelled.
- Indus Waters Diversion Warning: Pakistan threatened that any move by India to divert the course of the Indus rivers will be treated as war.
Global Market Implications
The tensions have had an immediate impact on global markets:
- Currency Fluctuations: The Indian rupee depreciated sharply, dropping to 85.6625 against the US dollar.
- Interest Rate Volatility: Forward premiums went up, and bond yields rose, with the 10-year government bond yield hitting 6.36%.
- Investor Caution: Forex and interest rate traders have become cautious because of concerns over heightened tensions, causing market volatility to increase.
International Condemnation and Calls for Restraint
The global community has come out in strong condemnation of the attack and called on both countries to act with restraint:
- United Nations: UN Secretary-General Antonio Guterres decried the attack and called for settling conflicts peacefully.
- Global Leaders: United States, United Kingdom, Russia, China, and other nations’ leaders condemned the attack and stood in solidarity with India, urging the de-escalation of tensions.
Conclusion
The Pahalgam attack has not only caused profound loss of life but also acutely tensed India-Pakistan relations, disrupted regional peace, and affected global markets. As both countries walk through this crisis, the world keenly observes, waiting for the resolution that does not lead to further escalation and ensures peace in the region.
