South Korea's stock market recorded its largest single-day decline in history on the 4th, as geopolitical tensions escalated following U.S. airstrikes on Iran.
The circuit breaker mechanism, triggered simultaneously for both KOSPI and KOSDAQ for the first time in two years, failed to halt the sell-off. The crash surpassed declines seen during the 9/11 terrorist attacks and the IT bubble collapse, wiping out 817 trillion won in KOSPI market capitalization over two days.
The won-dollar exchange rate breached 1,500 won in overnight trading for the first time in 17 years since the Lehman Brothers collapse, adding to concerns over high oil prices from a potential Strait of Hormuz blockade. Investors lamented, "It's as if war broke out in Korea, not the Middle East."
According to the Korea Exchange, KOSPI closed at 5,093.54, down 12.06% (698.37 points) from the previous day. KOSDAQ fell 14.0% (159.26 points) to close at 978.44. This marks KOSPI's first close below 5,100 since last month and KOSDAQ's first drop below 1,000 since January 23rd.
The previous record for KOSPI's largest single-day decline was 12.02% on September 12, 2001, the day after the 9/11 attacks. KOSDAQ also exceeded its previous record drop of 11.71% from March 19, 2020. Only 17 of KOSPI's 950 listed stocks finished higher.
The decline far exceeded those in Japan's Nikkei index (-3.61%) and Taiwan's TAIEX (-4.35%). Analysts point to South Korea's heavy dependence on Middle Eastern crude oil as a key vulnerability.
The won-dollar exchange rate hit 1,506.5 won in overnight trading, surpassing 1,500 won for the first time since March 2009. While authorities managed to push the rate down to 1,473 won during regular trading hours, concerns are mounting over import price surges due to the combination of Iran-driven high oil prices and the weakened currency.
The government has launched emergency response measures. The Financial Services Commission held an emergency financial market assessment meeting chaired by Chairman Lee Eok-won and announced it would more actively operate market stabilization programs exceeding 100 trillion won. There is also speculation that a 10 trillion won stock market stabilization fund could be activated for the first time in 18 years.
Market experts note that the steep correction reflects how sharply Korean stocks had risen. "If the conflict escalates into full-scale war, predictions become difficult, and oil price instability tends to trigger recession and bear markets," said Heo Jae-hwan, senior research fellow at Eugene Investment & Securities.