KOSPI Faces Volatility as Iran Crisis, Big Tech Earnings Converge

The KOSPI, which had been on an unstoppable rally after breaking through the 6,300 level, hit a major obstacle at the start of March. Asian markets tumbled broadly on concerns over international oil prices following the U.S. and Israeli strikes on Iranian leadership and the blockade of the Strait of Hormuz during the holiday period. With earnings releases from major U.S. artificial intelligence, software, and consumer goods companies clustered in the first week of March, extreme volatility is expected in markets this week.

On March 2, Japan's Nikkei index plunged as much as 2.7% during trading before paring losses to close down 1.35%. Taiwan's weighted index also fell 0.9%. Hong Kong's Hang Seng Index dropped as much as 2.51% intraday before recovering to close down in the low 2% range. Only China's Shanghai Composite Index showed differentiated movement, edging up 0.47%.

International oil prices surged as the Strait of Hormuz, through which 30% of global crude oil shipments pass, effectively entered a wartime state. On March 2, Brent crude futures jumped 13% in early trading, breaking through $82 per barrel—the largest single-day gain since March 2022, immediately following Russia's invasion of Ukraine. West Texas Intermediate crude futures also spiked more than 12% at the open to $75.33, triggering an unusual circuit breaker activation.

Markets are concerned about mounting inflationary pressure from surging oil prices. If the Strait of Hormuz blockade becomes prolonged, international oil prices are widely expected to breach $100 per barrel. Macroeconomic research firm Capital Economics projected that if Brent reaches $100, global inflation would rise by 0.6 to 0.7 percentage points.

Concerns over a natural gas crisis are also emerging. Goldman Sachs said in a report that if a complete strait blockade extends beyond one month, 20% of global liquefied natural gas production would be disrupted, potentially causing spot gas prices in Europe and Asia to surge 130%. In such a scenario, real gross domestic product in oil-importing nations including South Korea is expected to decline by approximately 0.3 to 0.4 percentage points.

Amid these macro headwinds, earnings releases from major U.S. companies scheduled for this week are also expected to be market-moving factors. Starting with MongoDB in the early morning hours of March 3 Korean time, CrowdStrike reports on March 4, Broadcom on March 5, and Costco and Marvell Technology on March 6.

MongoDB and CrowdStrike are leading software companies, and the key question is whether they can dispel recent "AI cannibalization concerns" spreading through markets. Broadcom saw its stock price plunge following its last earnings release. Along with Marvell, it is expected to serve as a barometer for confirming whether global AI infrastructure investment will continue. Costco's results will allow investors to assess the health of U.S. consumer spending indicators.

Global investment banks expect this Middle East crisis to trigger strong profit-taking and correction, given accumulated fatigue from the market's extended rally. As of the February 27 close, the KOSPI was up 45% year-to-date. The index rose 7.5% in just one week, from 5,808.53 on February 20 to 6,244.13 on February 27.

During the index correction, thematic differentiation is also likely to emerge. Looking at China's market, which closed slightly higher, refinery stocks hit their daily limit amid heightened geopolitical crisis, while commodities including gold and rare earth elements and defense stocks including aerospace showed strong gains. Analysis suggests Korean markets may also see strong fund flows into energy, defense, and commodity-related stocks this week as investors seek opportunities amid crisis.

"As risk-off sentiment spreads, stock markets are expected to weaken in the short term with portfolio rotation toward safe-haven assets," said Seo Sang-young, managing director at Mirae Asset Securities Research Center. "While short-term volatility is unavoidable, whether the situation becomes prolonged and the actual duration of the Strait of Hormuz blockade will be the key determining factors for the future direction of financial markets."