KOSPI Plunges Over 7% as Gold Surges 4%, Covered Call ETFs Draw Record Inflows

AI PRISM Custom Economic Briefing

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Triple Shock: As the war between the U.S.-Israel alliance and Iran shows signs of prolongation, a triple shock of simultaneous surges in oil prices, exchange rates, and interest rates has materialized. Hyundai Research Institute estimates that if international oil prices (Dubai crude basis) reach $100 per barrel, inflation will rise by 1.1 percentage points while growth will fall by 0.3 percentage points.

KOSPI Crash: The KOSPI closed at 5,791.91, down 452.22 points (7.24%) from the previous trading day, recording the largest absolute decline in history. The KOSPI 200 Volatility Index (VKOSPI), known as Korea's fear gauge, reached 62.97, breaking through the 60 level for the first time ever.

Safe-Haven Assets Surge: Heightened Middle East geopolitical risks drove gold prices sharply higher, spreading typical risk-off sentiment across global financial markets. Gold spot on the KRX gold market closed at 249,200 won per gram, up 4.14% from the previous trading day.

1. Oil, Exchange Rate, Interest Rate Triple Shock... "Korea Most Vulnerable to Stagflation"

Stagflation warnings are emerging in the market amid concerns over a prolonged war between the U.S.-Israel alliance and Iran. Korea's oil consumption (7th globally) far exceeds its economic size (12th globally), making it more susceptible to inflationary pressures. Hyundai Research Institute estimates that in an oil shock scenario where prices surge to $150 per barrel, inflation would spike by 2.9 percentage points while growth would plunge by 0.8 percentage points. Citi projects that if Brent crude exceeds $82 per barrel for an extended period, Korea's economic growth would fall by 0.45 percentage points and consumer price inflation would rise by 0.6 percentage points this year.

2. 842 of 935 Stocks Fall... KOSPI Fear Index Hits All-Time High

The KOSPI closed at 5,791.91, down 452.22 points (7.24%) from the previous trading day, marking the largest absolute decline on record. Samsung Electronics fell 9.88% to 195,100 won, while SK Hynix dropped 11.5% to 939,000 won. Foreign investors net sold 5.1731 trillion won in KOSPI stocks alone, extending their selling streak to nine consecutive trading days. The VKOSPI reached 62.97, breaking through 60 for the first time in history. As KOSPI's year-to-date cumulative return of 37.44% significantly outpaced the Nikkei 225 (11.78%), Hang Seng (0.60%), and S&P 500 (0.53%), volatility from short-term shocks has expanded accordingly. Daishin Securities raised its year-end KOSPI target from 5,800 to 7,500, reflecting earnings upgrades in major sectors centered on semiconductors.

3. Won-Dollar Exchange Rate Surges 26.4 Won... "Must Keep 1,500 Won Level in Sight"

As fears of an all-out war between the U.S. and Iran escalate, the won-dollar exchange rate closed at 1,466.1 won, up 26.4 won from the previous day—the highest since February 6. Following the Iranian Revolutionary Guard Corps (IRGC) declaration to close the Strait of Hormuz, West Texas Intermediate (WTI) crude rose more than 12% intraday to exceed $71 per barrel, while the Dollar Index (DXY) broke through the 98.7 level. KB Kookmin Bank estimates a 50% probability that the exchange rate could reach 1,500 won if the war continues for three to four weeks. Experts note that foreign exchange authorities' intervention, National Pension Service hedging volumes, and exporters' negotiated dollar sales near yearly highs could partially cap the exchange rate's upside.

4. Second-Generation Covered Call ETFs Gain Popularity for Reducing Correction Losses While Capturing Upside

Following KOSPI's sharp short-term rally, funds are flowing into second-generation covered call ETFs that aim to both hedge against corrections and participate in rallies. Total net assets of 52 domestically listed covered call ETFs reached 18.8631 trillion won as of end of last month, growing by more than 3 trillion won in just two months from year-end. KODEX 200 Target Weekly Covered Call's year-to-date cumulative return reached 41.04%, significantly outpacing RISE 200 Weekly Covered Call ETF (23.71%). Premium income from selling call options (the right to buy a specific asset at a set price) is exempt from comprehensive financial income taxation, drawing attention for its tax benefits. The asset management industry expects continued fund inflows into covered call ETFs given heightened market volatility from the Middle East situation.

5. KRX Gold Spot Surges Over 4% in One Day... Forecasts of "Up to 15% More Upside"

U.S. airstrikes on Iran have escalated Middle East geopolitical risks, pushing KRX gold spot up 4.14% to 249,200 won per gram. April gold futures in international markets are trading above $5,300 per troy ounce. The Financial Times, citing French investment bank Natixis, reported that gold prices could rise up to 15% to reach $5,800 if conflict in Iran persists. TIGER KRX Gold Spot and ACE KRX Gold Spot ETFs also rose 4.34% and 4.29%, respectively. Bitcoin plunged to the $63,000 level immediately after the incident broke out but rebounded to around $68,000 as bargain hunters entered the market.

6. Aviation Hit by Oil and Exchange Rate Turbulence... Shipping and Refining Also "Nervous"

Concerns over a prolonged Middle East war have simultaneously impacted the aviation, shipping, and refining industries through surging oil prices, exchange rates, and flight disruptions. Korean Air canceled its Incheon-Dubai route (flights KE951 and KE952) through the 5th. The airline reportedly incurs approximately 48 billion won in foreign currency valuation losses for every 10 won increase in the exchange rate. According to the Baltic Exchange, Very Large Crude Carrier (VLCC) spot average freight rates reached $204,000, up 196% from the start of the year—the highest since April 2020. However, some views suggest a low likelihood of prolonged Strait of Hormuz closure, meaning freight rate gains could be short-lived. Domestic refiners source 60-70% of their crude from the Middle East, with 95% passing through the Strait of Hormuz, making cost burdens inevitable if high oil prices persist.