KOSPI plunges amid U.S.-Iran war fears

South Korea’s stock market, among the global markets most affected by the war between the United States and Iran, suffered its steepest-ever decline Tuesday. In a volatile session with the KOSPI swinging more than 100 points within an hour, even individual investors who had been propping up the index through “buy-the-dip” trades appeared paralyzed by fear.

The market’s fall exceeded the losses recorded the day after the Sept. 11, 2001, terrorist attacks, surpassing the 12.06% drop on Sept. 12, 2001. Since the KOSPI’s launch on Jan. 4, 1983, both the percentage decline and the point drop set historic records. Over the past two days, the index has lost more than 1,150 points. Meanwhile, the won-dollar exchange rate briefly exceeded 1,500 won for the first time in 17 years, since the global financial crisis. With the conflict showing signs of potentially prolonged escalation, investor anxiety in South Korea has intensified more than in other major markets.

The KOSPI closed at 5,093.54, down 698.37 points from the previous session, and fell intraday to a low of 5,059.45, a 12.64% decline. The KOSDAQ index dropped 14.00%, or 159.26 points, closing at 978.44.

The sharp declines triggered a “sell-side” program trading halt, followed by a 20-minute full market suspension under the circuit breaker rule. It was the first time both indexes were halted simultaneously since Aug. 5, 2024, when fears of a U.S. economic slowdown triggered a rapid drop in the domestic market, more than a year and a half ago.

The consecutive steep drops came as investors anticipated that the U.S.-Iran conflict could spread across the Middle East, prolonging the market adjustment. Fear rippled through the market, with short-selling activity surging as investors bet on further declines. While other major Asian markets also fell, Japan’s Nikkei 225 dropped 3.61 percent and Taiwan’s TAIEX fell 4.35 percent, but the KOSPI’s losses were particularly severe.

In Seoul’s foreign exchange market, the won-dollar rate traded as high as 1,505.8 won before the overnight session closed at 2 a.m., marking the first time the rate surpassed 1,500 won since March 2009. By the end of daytime trading at 3:30 p.m., the rate settled at 1,476.2 won, up 10.1 won from the previous session.


지민구 기자 warum@donga.com