Escalating military conflict between the United States and Iran has triggered panic selling in South Korean markets, pushing the KOSPI index to the brink of falling below 5,000 just 40 days after breaching that milestone for the first time.
The benchmark index hit a historic high above 5,000 on January 22 but now faces collapse as investor sentiment deteriorates sharply amid fears of prolonged warfare.
Samsung Electronics plunged 11.74% to 172,200 won on the Korea Exchange on Tuesday, while SK Hynix tumbled 9.58% to 849,000 won.
Circuit breakers were triggered on both the KOSPI and KOSDAQ markets after each fell more than 8%. The Korea Exchange halted trading for approximately 20 minutes. At the time of suspension, the KOSPI had plunged 469.75 points, or 8.11%, to 5,322.16. After trading resumed, losses deepened further, with the index falling as much as 9.99% to 5,213.21 intraday.
Retail investors showed mixed reactions to the sharp decline. Some are eyeing buying opportunities at lower prices, while others lament insufficient funds for additional purchases.
"I learned during COVID that the key to investing is holding on through downturns," said a 30-something office worker surnamed A, who lives in Mapo-gu, Seoul. "I plan to buy the dip this time, drawing on the survival DNA I developed back then."
Another individual investor explained he had preemptively sold some holdings due to anxiety over the recent rally. "I was actually scared because the KOSPI kept climbing toward 8,000," he said. "Fortunately, I took profits on Samsung Electronics and SK Hynix and bought defense stocks, which helped reduce my losses in this plunge."
On social media, however, retail investors expressed frustration at lacking cash to deploy. "This seems like an opportunity, but I have no ammunition," and "I'm just watching because I have no cash," were common sentiments.
Geopolitical instability from the U.S.-Iran military escalation is cited as the primary driver of the selloff. Crude oil prices surged more than 10% over two days as war fears intensified, fueling concerns about resurgent inflation and a global economic slowdown.
U.S. markets also suffered. On Monday (Eastern Time), both the Dow Jones Industrial Average and Nasdaq Composite declined, while the Philadelphia Semiconductor Index plunged more than 4%. This dragged down Korean semiconductor heavyweights including Samsung Electronics and SK Hynix.
Securities analysts point to the duration of the conflict as the key variable determining the KOSPI's direction. Market impact would be limited if the war ends quickly, but losses could widen significantly if hostilities persist.
Some brokerages forecast the KOSPI could rebound after a correction of around 10% if the conflict concludes within one month. However, if war drags on and energy supply shocks materialize—such as a blockade of the Strait of Hormuz—the index could fall 20% to 30%, according to other projections.
"The next week or so will be a critical turning point for this situation," Park Sang-hyun, a researcher at iM Securities, wrote in a report Tuesday. "If President Trump fails to find an early exit from the Iran crisis, energy price instability could persist and financial market volatility could expand."
Experts advise investors to proceed cautiously, noting that while the sharp decline may relieve some market overheating, the possibility of prolonged conflict cannot be ruled out.