As tensions between the United States and Iran peaked, Korea's stock market also plunged. On the 23rd, the KOSPI index posted its third-deepest drop of the year. A sell-sidecar (temporary suspension of program sell quotes) was triggered during intraday trading; it was the fourth sell-sidecar this month alone.
The KOSPI index closed at 5405.75, down 6.49% (375.45 points) from the previous trading day. Starting the session at 5580.15, down 3.48% from the previous trading day, the KOSPI index widened its losses during intraday trading.
At one point in the morning session, a sell-sidecar was triggered. It was the first sell-sidecar on the Korea Exchange in 10 trading days. It was also the sixth sell-sidecar this year on the Korea Exchange and the fourth this month.
The market plunged on foreign and institutional selling. Foreign investors and institutions were net sellers of more than 3.6 trillion won and 3.8 trillion won, respectively. In contrast, individuals bought more than 7 trillion won, defending the 5400 level.
Large-cap stocks by market capitalization on the Korea Exchange also tumbled. Samsung Electronics and SK hynix plunged 6% and 7%, respectively, surrendering the "200,000-electronics" and "1,000,000-nix" levels.
Lee Kyung-min, a researcher at Daishin Securities, said, "With uncertainty in global stock markets rising recently and expectations for liquidity easing by the Central Bank weakening, demand for holding cash appears to have increased," adding, "In the domestic market, simultaneous large-scale net selling by foreigners and institutions was triggered to realize profits in leading and large-cap stocks that are easy to cash out, such as semiconductors, securities, nuclear power, and defense."
The domestic stock market was hit as Middle East tensions over a U.S.-Iran war reached a peak. Earlier, U.S. President Donald Trump warned on the 21st (local time), "If Iran does not fully open the Strait of Hormuz within 48 hours, we will obliterate Iran's power plants."
In response, Iranian spokesperson Ebrahim Zolfaghari countered, "If the U.S. threat targeting Iran's power plants is carried out, the Strait of Hormuz will be completely closed and will not reopen until the power plants are rebuilt."
International oil prices also surged. West Texas Intermediate (WTI) climbed close to $100, and Brent crude also rose to $112. The spike in oil prices stoked inflation fears. According to CME FedWatch, expectations for a U.S. rate cut within the year have vanished, while the probability of a rate hike within the year rose to 24.3%.
Kang Jin-hyeok, a researcher at Shinhan Investment & Securities, said, "Tensions escalated with President Trump's ultimatum and Iran's resolve to resist," adding, "On top of that, the possibility of a U.S. benchmark rate hike within the year overtook expectations for a cut, dealing a blow to the stock market."
Also weighing on sentiment was the nomination of a monetary-policy hawk as the new Bank of Korea governor candidate. President Lee Jae-myung on the previous day (the 22nd) nominated Shin Hyun-song, head of the Monetary and Economic Department at the Bank for International Settlements (BIS), as the new Bank of Korea governor candidate.
Industry watchers assess the nominee as hawkish. Kim Ji-na, a researcher at Eugene Investment & Securities, said, "He places importance on financial stability and is wary of asset bubbles," adding, "Accordingly, his perception of inflation risks is naturally on the higher side."
The KOSDAQ index also closed at 1096.89, down 5.56% from the previous day. Individuals also defended the KOSDAQ market. While foreigners and institutions were net sellers of 260.9 billion won and 200.4 billion won, respectively, individuals alone were net buyers of 465.6 billion won. However, Sam Chun Dang Pharm, which newly rose to No. 1 in KOSDAQ market capitalization, managed to close up more than 3%.