Market Plunges as Middle East Tensions Trigger Panic Selling

By Almas Equities Research

The Colombo market witnessed a sharp sell-off on 03rd March 2026, as escalating tensions in the Middle East sparked concerns over potential fuel supply disruptions and a decline in worker remittances. Heightened uncertainty triggered panic selling at the Colombo Stock Exchange, resulting in extreme volatility throughout the session.

Within the first two minutes of trading, the market activated its first circuit breaker after the S&P SL20 declined by 5%. Following the temporary halt, a strong rebound was observed during the first half of the session, with the ASPI recovering nearly 450 points and partially offsetting the initial drop of over 1,250 points. However, negative sentiment resurfaced in the latter half of trading, leading to renewed selling pressure and a steep decline by the close.

Elevated turnover and share volumes reflected a defensive investor approach, as participants moved to limit losses and increase cash positions. The Capital Goods sector dominated turnover, recording LKR 2.67 Bn with 48.55 Mn shares traded. AEL.N led the sector, generating LKR 0.61 Bn in turnover with 8.21 Mn shares exchanged. Crossings accounted for LKR 0.79 Bn (8% of total turnover), with HNB.N recording the largest block trade of LKR 0.15 Bn involving 0.36 Mn shares.

At the close, the ASPI plunged 1,290.68 points (-5.44%) to settle at 22,443.38, while the S&P SL20 declined 322.32 points (-4.86%) to 6,313.65. Total market turnover surged to LKR 9.56 Bn, supported by a share volume of 371.71 Mn shares. Market breadth deteriorated sharply, with only 5 gainers against 250 decliners, underscoring broad-based selling pressure across the board.

Among the limited positive contributors, LIOC.N gained 3.66 points, followed by CFLB.N, BOPL.N, MRH.N, and MADU.N. On the downside, COMB.N led the decline with a 62.61-point drag, alongside SAMP.N, HNB.N, JKH.N, and HAYL.N, which exerted significant pressure on the indices. Notably, LIOC.N recorded active participation, posting LKR 0.29 Bn in turnover with 1.97 Mn shares traded, alongside a price gain of 1.94%.

Overall, the session reflected heightened risk aversion and systemic selling pressure, as external geopolitical shocks heavily influenced investor sentiment and drove one of the sharpest single-day declines in recent market history.