Tensions Escalate Between India and Pakistan
Tensions between India and Pakistan have sharply escalated following the April 22, 2025 terrorist attack in Pahalgam, Kashmir, which killed 26 civilians, primarily Hindu tourists. The Resistance Front (TRF), an offshoot of the Pakistan-based Lashkar-e-Taiba, claimed responsibility, citing opposition to demographic changes in the region. India has blamed Pakistan for supporting the attackers, leading to a series of retaliatory measures. These include suspending the Indus Waters Treaty, expelling Pakistani diplomats, and revoking visas for Pakistani nationals.
Pakistan, denying involvement, has closed its airspace to Indian aircraft, suspended trade, and warned of a potential Indian military strike within 24 to 36 hours, citing "credible intelligence." Both nations have engaged in cross-border skirmishes, and the international community, including the UN and the U.S., has urged restraint to prevent further escalation between these nuclear-armed neighbors.
Forecast:
Base Case (60%)
Continued diplomatic breakdown, cross-border skirmishes, but no full-scale war. Expect political hostility, regional instability, and moderate economic fallout.
Downside Case (25%)
A miscalculation triggers limited war, causing severe financial disruption, human displacement, and long-term regional insecurity.
Upside Case (15%)
Rapid international mediation succeeds; both countries pull back from brink, resume diplomatic contact, and partially normalize trade and airspace relations.
