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Markets Hit and Flights Diverted as India-Pakistan Tensions Flare Up

Tensions between India and Pakistan continue to escalate at speed, with both sides reportedly shooting down one another’s air force jets, Indian airspace being temporarily shut to commercial planes north of Delhi, and investors fleeing for safer havens.

The current crisis began on February 14 when Pakistan-based militants launched a suicide bombing inside the Indian part of the disputed Kashmir region, killing 40 police force members. It stepped up dramatically this week when Indian jets bombed what Delhi said was a terrorist training camp on the Pakistani side. India claimed to have killed 300 people in the strikes.

On Wednesday, Pakistan said it had shot down two Indian Air Force jets, and had captured two pilots. India, however, insisted it only lost one plane, in an incident where Indian jets intercepted Pakistani warplanes that had crossed into Indian airspace to attack military installations—the Indian Air Force also said it had shot down one of those planes.

These are the first aerial attacks to occur across the “Line of Control” that splits Kashmir since 1971, at which time the countries were at war. The two countries, which both have nuclear weapons, have fought several times over Kashmir.

“History tells us that wars are full of miscalculation. My question is that given the weapons we have can we afford miscalculation,” said Pakistani Prime Minister Imran Khan in a Wednesday broadcast. “We should sit down and talk.”

Following the latest skirmish, Indian airlines canceled flights to cities in the north of India, due to airspace restrictions.

However, later in the day, an official from India’s civil aviation regulator said flights to north Indian airports could immediately resume. Pakistan is at the time of writing still maintaining a ban on aircraft entering from Delhi at an altitude of below 32,000 feet—that ban has led Air India to reroute flights taking off from Delhi that would have passed over Pakistan.

The situation has led some investors to turn to safer havens, with the Japanese yen and Swiss franc both strengthening in the wake of Pakistan’s downing of the Indian aircraft. Pakistan’s KSE 100 index fell by as much as 1,500 points Wednesday, while India’s BSE Sensex index also fell 600 points.