An "oil shock" hit Korea's stock market on expectations that the U.S.-Iran war will drag on. The impact was significant as the Strait of Hormuz, a global crude oil trade route, was closed and international oil prices broke through the psychological barrier of $100 per Barrel. A circuit breaker was triggered on the Korea Exchange's main board for the eighth time on record.
The KOSPI closed on the 9th at 5,251.87, down 5.96% (333.00 points) from the previous trading day.
That day, the KOSPI opened at 5,265.37, down 319.50 points (5.72%) from the previous trading day. The decline deepened through the morning, with the index plunging more than 8%, and a circuit breaker was triggered for the first time in three trading days. A sell-sidecar was also triggered on the KOSDAQ market that morning.
Simultaneous net selling by foreigners and institutions dragged the market down. In the Korea Exchange's main board, foreigners sold more than 3.2 trillion won and institutions more than 1.5 trillion won. However, individual investors' bargain hunting came in, narrowing additional losses after the circuit breaker. Individuals bought more than 4.6 trillion won, defending the 5,200 level.
It appears the double whammy over the weekend was reflected as soon as Monday's session opened. U.S. President Donald Trump maintained a hard-line stance, demanding Iran's "unconditional surrender," fueling concerns the Iran war would be prolonged. On top of that, U.S. employment data fell far short of expectations, raising fears of stagflation (recession amid high inflation).
With international oil prices breaking through $100 per Barrel, tensions in financial markets rose further. West Texas Intermediate (WTI) futures rose to as high as $119.48 at 11:33 a.m. that day. It was the first time in four years since 2022, when Russia invaded Ukraine, that international oil prices topped $100 per Barrel. The closure of the Strait of Hormuz prompted major oil producers to cut output, which had a large impact.
Large caps also posted steep losses on external shocks. Samsung Electronics and SK hynix fell more than 7% and 9%, respectively.
Kang Jin-hyeok, senior researcher at Shinhan Investment & Securities, said, "Foreigners continued dumping, and large caps were weak," adding, "Profit-taking added to the pressure, and semiconductor stocks such as Samsung Electronics and SK hynix are falling."
Oil-related stocks were split. Energy names such as SK Gas were strong, but airline and finished car-related stocks were weak on the oil surge. Hyundai Motor and Kia fell more than 8%.
Lee Kyung-min, a researcher at Daishin Securities, explained, "The KOSPI is replicating a sharp drop as it reflects the surge in international oil prices and the won-dollar exchange rate," adding, "Only about 60 stocks are rising on the KOSPI, and indiscriminate declines are also occurring in sectors such as defense and refining that could benefit from geopolitical risks."
However, retail bargain hunting held the KOSPI at the 5,200 level. Lee assessed, "Last week's swings built confidence around 5,000 points, and the learning effect remains valid."
That day, the KOSDAQ closed at 1,102.28, down 4.54% (52.39 points) from the previous trading day. On the KOSDAQ, foreigners were net sellers of 545.2 billion won, while individuals and institutions were net buyers of 517 billion won and 49.5 billion won, respectively.
Researcher Kang said, "Concerns about a prolonged war also worsened investor sentiment toward the KOSDAQ market," adding, "Despite inflows of expectations from the launch of KOSDAQ active exchange-traded funds (ETFs) and the implementation of business development companies (BDCs) next week, the market failed to sustain a rebound amid dumping."