War Shock Splits Korean Sectors: Autos, Chemicals Plunge While Utilities, Construction Rise

The Korean stock market has experienced sharp divergence across sectors following the military conflict between the U.S., Israel, and Iran. While most industries took direct hits from high oil prices and elevated exchange rates, utilities and construction played defensive roles and posted gains.

According to the Korea Exchange on the 23rd, the KOSPI fell 7.41% and KOSDAQ dropped 2.62% from September 27—before the war broke out—through October 20.

By sector, automobiles (-18.61%), steel (-14.98%), energy and chemicals (-10.79%), healthcare (-7.95%), and machinery and equipment (-7.03%) recorded the steepest declines. Analysts attribute these losses to surging oil prices, a rising won-dollar exchange rate, and logistics disruptions following the Middle East conflict, which hit export-dependent industries hardest.

Major stocks also struggled. Hyundai Motor (-23.29%), Kia (-18.00%), POSCO Holdings (-16.83%), and LG Chem (-25.75%) all fell significantly more than the broader KOSPI index.

"If the Middle East conflict drags on, we expect energy prices to rise, shipping and logistics disruptions to increase, interest rate cuts to be delayed due to persistent inflation, and the global economy to contract," said Kim Gwi-yeon, a researcher at Daishin Securities.

In contrast, utilities and construction served as safe havens. During the same period, utilities rose 12.58% and construction gained 9.14%, making them the only sectors to post positive returns.

The utilities sector is considered a classic defensive play due to its role in supplying essential infrastructure such as electricity, gas, and water, making it less sensitive to economic fluctuations. However, state-owned enterprises including Korea Electric Power Corporation (-15.98%) and Korea Gas Corporation (-8.50%) weakened under oil price pressure, while private renewable energy companies showed strength. SK Eternix surged 107.99% and SGC Energy jumped 24.01%.

"Amid prolonged Middle East tensions and stagflation concerns, defensive sectors like utilities are showing relative strength," noted Kim Yun-jung, a researcher at LS Securities.

Construction also extended its gains on expectations of nuclear power plant contracts. Daewoo Engineering & Construction, considered a beneficiary of U.S. nuclear investment, has surged 88.46% this month.

"Construction companies are seeing limited impact because they were already in a new-order slump after completing low-margin projects from the COVID-19 period," said Park Se-ra, a researcher at Shinyoung Securities. "However, future negotiations with clients over construction costs could become an important factor to watch, requiring continued monitoring."