Escalating fears of a wider Middle East war sent South Korea's stock market plunging more than 5% in early trading on Monday, raising fresh "Black Monday" alarms. Buying by retail and institutional investors helped the benchmark KOSPI hold the 5,200 line, but the index's support levels have been falling in a staircase pattern, making the defense of the psychologically critical 5,000 level a key variable ahead.
The Korea Composite Stock Price Index (KOSPI) closed at 5,277.30 on the 30th, down 161.57 points, or 2.97%, from the previous session, according to Korea Exchange (KRX). The index fell as much as 5% intraday to touch 5,154.16. From the 5,600 level (5,642.21) on the 25th, the KOSPI has dropped for three consecutive trading days to reach the 5,200 range. Major Asian markets also declined, with Japan's Nikkei falling 2.79% and Taiwan's TAIEX losing 1.80%.
The weakness in Korean equities directly reflects rising global uncertainty. A surge in international oil prices compounded the damage to investor sentiment. After Yemen's Houthi rebels officially entered the conflict, escalating hostilities, Brent crude May futures — the international oil benchmark — traded as high as $115.09 per barrel during the session, up 2.2% from the previous close. Samsung Electronics (005930.KS), hit by the additional headwind of Google's TurboQuant setback, fell 1.89% to 176,300 won, while SK hynix (000660.KS) dropped 5.31%, slipping to the so-called "870,000-nix" level. Most top market-cap stocks outside the secondary battery sector declined. "Since the war began, the stock market has been reflecting war developments with a lag," said Kim Hak-kyun, head of the research center at Shinyoung Securities. "Donald Trump made a TACO — Trump Always Chickens Out — move over the weekend, but Iran's response was highly hostile and oil prices surged, and those effects were reflected."
The continued weakening of the Korean won has stoked currency-loss concerns, accelerating the exit of foreign capital. In offshore trading at 4:34 p.m., the won-dollar exchange rate climbed as high as 1,521.1 won per dollar, breaching the 1,520-won level. That marked the highest level in approximately 17 years, since an intraday peak of 1,561.0 won on March 10, 2009, during the global financial crisis. Foreign investors have been net sellers on the main KOSPI market for eight consecutive trading sessions, dumping a total of 32.07 trillion won this month alone.
Short-selling balances have also surged, broadening bets on further declines. As speculation grew over the possible deployment of U.S. ground troops inside Iranian territory, fueling fears of a prolonged conflict, the net short-selling balance on the KOSPI market reached 16.097 trillion won as of the 25th — an increase of approximately 818 billion won from the 27th of the previous month. It was the first time the short-selling balance exceeded 16 trillion won since short selling resumed in March of last year. The net short-selling balance represents the value of borrowed shares that have been sold but not yet covered. A rising balance signals that a growing number of investors are betting on further stock-price declines.
Experts view the KOSPI 5,000 level as a psychological support floor but warn that further drops are unavoidable if the Middle East situation deteriorates. "Given that the current government's policy target has been KOSPI 5,000, the 5,000 level should find support," said Baek Young-chan, head of the research center at Sangsangin Securities. "But if worst-case scenarios materialize — such as a U.S. ground deployment or the seizure of Kharg Island — downward pressure will be inevitable." Kim Tae-hong, CEO of GrowthHill Asset Management, said, "If foreign selling continues and margin calls pile on, the 5,000 line could temporarily break." He added, however, "That range could present a buying opportunity from a medium- to long-term perspective."
