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.

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.

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