"There is panic selling in the market. Foreign investors are selling because of the global sell-off, political uncertainity and the rise in international oil prices," said Ayub Ansari, analyst at Invest and Finance Securities Ltd.

KSE benchmark 100-share index was 3.59 percent, or 405.24 points, lower at 11,134.02 on turnover of 104.86 million shares by 3:32 p.m. (1032 GMT).

Global oil jumped by more than $2 to above $113 per barrel on Friday as another bout of nerves spread in the market on concerns that widening unrest in Libya could hit fuel supplies.

Brent oil had pulled back following a 7 percent surge to almost $120 on Thursday after rumours that Libyan leader Muammar Gaddafi had been shot, and on Saudi Arabia's reassurances that it could counter Libyan supply disruptions.

Saudi reassurances were not enough to calm jittery markets, with analysts predicting that further rise in oil prices could trigger more selling in stocks and other risky assets.

The Karachi Stock Exchange has a small market capitalisation and selling of $2 million to $3 million amid lack of buyers would spark a sell off, analysts said.

Dealers said that political uncertainty also triggered the sell off at the local bourse.

"There are many reasons for the fall in the market, one being the outcome of the PML-N meeting," said Sajid Bhanji, director at brokers Arif Habib Ltd.

The PML-N met on Friday to decide whether it will keep the Pakistan People's Party (PPP) members in the Punjab provincial coalition.