On the 3rd, the KOSPI index plunged more than 7% on a Middle East-driven geopolitical crisis, breaking the record for the largest point drop. On news of U.S. and Israeli airstrikes on Iran, panic selling continued and the index quickly sank below the 6,000 level.

As the fallout from the United States–Iran war sends the domestic stock market plunging on the 3rd, closing prices display on the dealing room ticker at the Hana Bank headquarters in Jung District, Seoul. /Courtesy of News1

According to the Korea Exchange (KRX), the KOSPI index closed at 5,791.91 points, down 452.22 points (7.24%) from the previous trading day.

This is the largest point decline since the KOSPI market opened on July 12, 1988. The previous record was on the 2nd of last month, when it fell 274.69 points. At that time, the impact came after Kevin Warsh, a former Federal Reserve governor, was named chair of the Federal Reserve (Fed).

The decline rate (7.24%) was the largest in about 1 year and 7 months since Aug. 5, 2024. Since 2020, it was the third-largest drop after Aug. 5, 2024 (–8.77%) and March 19, 2020 (–8.39%) during the COVID-19 pandemic.

In the stock market on the day, share prices fell for 842 of the 926 issues traded, while only 75 rose. More than 90% of all listed issues declined.

The KOSDAQ index also closed at 1,137.70, down 55.08 points (4.62%) from the previous trading day. Of the 1,820 KOSDAQ-listed issues, 1,543 declined.

The KOSPI200 volatility index (VKOSPI) jumped 8.86 points (16.37%) to as high as 62.98 from the previous trading day, the highest since March 2020. Generally, when it exceeds 50, investors are considered to have significant anxiety about volatility.

Jo Ain, a Samsung Securities researcher, said, "From the start of the year through February, the KOSPI rose 48% and the KOSDAQ 29%, with large-cap stocks such as Samsung Electronics and SK hynix leading the strength, which increased profit-taking pressure," and "concerns spread that it could burden the Korean economy, which has a high energy dependency, because about 70% of Korea's imported crude passes through the Strait of Hormuz."

Some analysts say there is still a possibility that market volatility will increase further this week. Lim Jeong-eun, a KB Securities researcher, said, "The U.S. February ADP private employment report, due on the 4th, and the U.S. February nonfarm payrolls, due on the 6th, will once again influence the Fed's rate decision path, and the expansion of market volatility this week is expected to continue."

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