Pakistan closed its air space for Indian airlines and rejected New Delhi’s suspension of a critical water sharing treaty on Thursday in retaliation for India’s response to a deadly Islamist militant attack on tourists in Indian Kashmir.

The tit-for-tat announcements took relations between the nuclear-armed neighbours, who have fought three wars, to the lowest level in years.

The latest diplomatic crisis was triggered by the killing of 26 men at a popular tourist destination in Indian Kashmir on Tuesday, in the worst attack on civilians in India since the 2008 Mumbai shootings.

New Delhi said there were cross-border elements to the attack and downgraded ties with Pakistan on Wednesday, suspending a 1960 treaty on sharing waters of the Indus River and closing the only land crossing between the neighbours.

Indian police published notices naming three suspects and saying two were Pakistanis, but New Delhi has not offered any proof of the links, or shared any more details.

On Thursday, Pakistan said it was closing its air space to Indian-owned or operated airlines, suspending all trade including through third countries and halting special South Asian visas issued to Indian nationals.

Islamabad will also exercise the right to hold all bilateral accords with India, including the 1972 Simla Agreement, in abeyance until New Delhi desists from “fomenting terrorism inside Pakistan”, Pakistan’s Prime Minister’s office said in a statement.

The Simla Agreement was signed after the third war between the two countries and lays down principles meant to govern bilateral relations, including respect for a ceasefire line in Kashmir.

There was no immediate response from New Delhi to Pakistan’s announcement.

Pakistan’s dollar-denominated government bonds dropped more than 4 cents on Thursday as the tensions escalated.

Muslim-majority Kashmir has been at the heart of the animosity between India and Pakistan, with both claiming it in full and ruling it in part. It has been the cause of two of their three wars and also witnessed a bloody insurgency against Indian rule.

Islamabad also said it “vehemently rejects” India’s suspension of the Indus Waters Treaty and said that any attempt to stop or divert water belonging to Pakistan would be considered an “act of war and responded with full force across the complete spectrum of national power”.

The water treaty, mediated by the World Bank, split the Indus River and its tributaries between the neighbours and regulated the sharing of water. It had so far withstood even wars between the neighbours.

What is the Indus Waters Treaty

WHAT IS THE INDUS WATERS TREATY?

The nuclear-armed neighbours disagree over use of the water from rivers that flow downstream from India into the Indus river basin in Pakistan.

The use of the water is governed by the Indus Waters Treaty, which was mediated by the World Bank and signed by the neighbours in September 1960.

The agreement split the Indus and its tributaries between the two countries and regulated water sharing. India was granted the use of water from three eastern rivers – Sutlej, Beas and Ravi – while Pakistan was granted most of the three western rivers – Indus, Jhelum and Chenab.

There is no provision in the treaty for either country to unilaterally suspend or terminate the pact, which has clear dispute resolution systems.

WHAT ARE THE CONCERNS OVER WATER?

The nuclear-armed neighbours have argued over and disputed several projects on the Indus and its tributaries in India for years.

Pakistan is heavily dependent on water from this river system for its hydropower and irrigation needs. Pakistan says India unfairly diverts water with the upstream construction of barrages and dams, a charge India denies.

Pakistan is concerned that India’s dams will cut flows on the river, which feeds 80% of its irrigated agriculture. It has asked for a neutral expert and then an arbitration court to intervene in two recent hydropower projects.

India has accused Pakistan of dragging out the complaints process, and says the construction of its Kishanganga and Ratle hydroelectric projects is allowed under the treaty. It has also sought modification of the pact to get around such delays.

WHAT COULD THE SUSPENSION CHANGE?

The suspension of the accord is not expected to have an immediate impact on the flow of water to Pakistan as India does not have enough storage capacity.

But India’s move could bring uncertainty for Pakistan’s agricultural system.

The suspension means India can stop sharing crucial information and data on release of water from barrages/dams or on flooding, Indian officials said, adding that New Delhi will also not be obliged to release minimum amounts of water during the lean season.

HOW HAS PAKISTAN REACTED TO THE DECISION?

The treaty is a binding international agreement brokered by the World Bank and contains no provision for unilateral suspension, a statement from Pakistan Prime Minister Shehbaz Sharif’s office said on Thursday.

“Any attempt to stop or divert the flow of water belonging to Pakistan as per the Indus Waters Treaty, and the usurpation of the rights of lower riparian will be considered as an Act of War and responded with full force,” the statement said.

Pakistan’s status as “lower riparian” refers to its downstream position.

Ghasharib Shaokat, the head of product at Pakistan Agriculture Research, called the treaty the backbone of the country’s agriculture sector.

“It puts our agricultural future on shaky ground. If water flows become erratic, the entire system takes a hit — especially irrigation-dependent crops such as wheat, rice, and sugarcane,” Shaokat said.

“Yields could drop. Costs could rise. Food prices would likely spike. And small-scale farmers, who already operate on thin margins, would bear the brunt of it.”

Khalid Hussain Baath, chairman of a national farmers’ union in Pakistan, painted the move as an act of belligerence.

“This is a true war,” Baath said from Lahore. “We already have a water shortage because of climate change. Low rainfall this year, and limited snow means that the water level is already 20-25% lower than last year.”

Pakistan is heavily dependent on water flowing downstream from this river system from India for its hydropower and irrigation needs. Suspending the treaty would allow India to deny Pakistan its share of the waters.

MODI PLEDGES TO PUNISH ATTACKERS

Pakistan’s response came hours after Indian Prime Minister Narendra Modi vowed to pursue, track and punish the militants who separated the men among the tourists in Kashmir’s Pahalgam area and shot them dead.

It also came after the Indian foreign ministry announced the suspension of all visa services to Pakistanis and revoked visas that have already been issued.

Ahead of his public speech at an event in the eastern state of Bihar, Modi folded his hands in prayer in remembrance of the men killed in Kashmir, exhorting thousands gathered at the venue to do the same.

“We will pursue them to the ends of the earth,” Modi said, without referring to the attackers’ identities or naming Pakistan.

“They have made the mistake of attacking the soul of India. I want to say clearly, that those who have planned and carried out this attack will be punished beyond their imagination,” Modi said to cheers from the crowd.

Modi has called an all-party meeting with opposition parties later on Thursday to brief them on the government’s response to the attack.

In New Delhi, dozens of protesters gathered outside the Pakistani embassy in the diplomatic enclave, shouting slogans and pushing against police barricades.

A film that starred Pakistani actor Fawad Khan in the lead with Bollywood actor Vaani Kapoor will now not be released in India, local media reported, citing federal information ministry sources.

Diplomatic relations between the two countries were weak even before the latest measures were announced as Pakistan had expelled India’s envoy and not posted its own ambassador in New Delhi after India revoked the semi-autonomous status of Kashmir in 2019.

Tuesday’s attack is seen as a setback to what Modi and his Hindu nationalist Bharatiya Janata Party have projected as a major achievement in revoking the special status Jammu and Kashmir state enjoyed and bringing peace and development to the long-troubled Muslim-majority region.

India has often accused Islamic Pakistan of involvement in the insurgency in Kashmir, but Islamabad says it only offers diplomatic and moral support to a demand for self-determination.

Tens of thousands of people have been killed in Kashmir since the uprising began in 1989, but it has tapered off in recent years and tourism has surged in the region.