ISLAMABAD - Suspected Taliban militants shot and killed a Pakistani army brigadier and his driver in the capital on Thursday as the military continued a major offensive against the insurgents in their strongholds near the Afghan border.
Exposing the country's frayed nerves, the stock market dipped nearly three percent on false reports that a bomb had been found and shots fired at a courthouse in the capital, Islamabad.
The false alarm came as the country remained on high alert for possible retaliatory strikes by Taliban militants while the army attacks their strongholds in South Waziristan.
The offensive is a test of the government's determination to tackle Islamic fundamentalists, and the campaign is being closely followed by the U.S. and other powers embroiled in Afghanistan.
On Thursday, suspected militants shot and killed Brigadier Moin-ud-din Ahmed, deputy force commander of the United Nations Mission in Sudan (UNMIS), who was on vacation in Islamabad.
Everyone in the mission is very shocked, Kouider Zerrouk, UNMIS spokesman told Reuters.
UNMIS, one of the world's largest U.N. peacekeeping missions with around 11,000 personnel, was set up to monitor and support the 2005 peace deal than ended the two-decade civil war between Sudan's north and south.
Ahmed, whose rank is equivalent to a U.S. brigadier-general, one step below a full one-star general, is the second senior officer to be killed in less than two weeks following a commando-style raid on army headquarters in Rawalpindi.
A shopkeeper, Naveed Haider, said he saw a man running, his face covered with a yellow cloth, before he heard gunshots.
A man with a motorbike was waiting for him on the street. He sat on it and they fled, the witness said before taken away by police for questioning. Police said Brig. Haider's driver was also killed and a bodyguard wounded.
Pakistani forces launched an offensive on Saturday to take control of lawless South Waziristan after militants rocked the country with a string of bomb and suicide attacks, killing more than 150 people.
Analysts have warned of the possibility of more urban attacks as the militants are squeezed out of their strongholds, with the Taliban hoping bloodshed and disruption will cause the government and ordinary people to lose their appetite for the offensive.
On Tuesday, two suicide bombers attacked an Islamic university in Islamabad, killing at least four people, and the next day authorities ordered schools and colleges to close across the country.
The KSE-index fell three percent on Thursday's false rumors of an incident at a courthouse, but recovered to close down 1.01 percent at 9,154.00 after falling 3.36 percent on Wednesday.
Investors are very jittery at this point due to the law and order situation, said Sajid Bhanji, a dealer at brokers' Arif Habib Ltd.
Remote and rugged South Waziristan, with its rocky mountains and patchy forests cut through by dry creeks and ravines, is a global hub for militants.
About 28,000 soldiers are battling an estimated 10,000 hard-core Taliban, including about 1,000 tough Uzbek fighters and some Arab al Qaeda members.
The army said 24 militants and two soldiers were killed in the fighting on Thursday.
Foreign reporters are not allowed anywhere near the battle zone and it is dangerous even for Pakistani reporters to visit. Independent confirmation of casualty figures has not been possible.
More than 100,000 civilians have fled the area, with about 32,000 of them leaving since October 13, the United Nations said.
The army has launched brief offensives in South Waziristan before, the first in 2004 when it suffered heavy casualties before striking a peace pact.