South Korean shares dropped more than 6% on Monday to close at their lowest level in two weeks, while the won weakened to a 17-year low, as heightened West Asian tensions dampened appetite for riskier assets.
U.S. President Donald Trump and Iran threatened to escalate their war by attacking energy facilities in the Gulf, a potential widening of hostilities which could deepen a regional crisis and add to concerns in global markets.
The benchmark KOSPI closed down 375.45 points, or 6.49%, at 5,405.75, marking its lowest level since March 9 and the biggest daily percentage loss since March 4.
The index extended losses even after a trading curb was activated on the index earlier in the session. It was the fourth time a sidecar curb was triggered just this month due to heightened volatility sparked by the Middle East conflict.
The won was quoted 0.83% lower at 1,517.3 per dollar on the onshore settlement platform, hitting its lowest level since March 2009.
“Hopes are fading that the war will end soon,” said Huh Jae-hwan, an analyst at Eugene Investment & Securities.
“We don’t have to be too pessimistic because Asian countries are in a stronger position than before thanks to robust tech sectors, while the government is also planning an extra budget. However, the market’s patience has become weak,” Huh said.
Budget Minister nominee Park Hong-keun said on Monday the South Korean government would draft a supplementary budget as soon as possible, a day after the government and the ruling party agreed on extra spending of around 25 trillion won ($16.58 billion) to support those hit by surging oil prices.
Shin Hyun-song, who was named on Sunday to head the Bank of Korea, said he would seek a “balanced” policy with inflation, growth and financial stability under consideration, as market volatility and economic uncertainty heightened after the Iran war.
In the stock market, only 53 advanced among 927 traded issues, while 864 declined. Among index heavyweights, chipmaker Samsung Electronics fell 6.57% and peer SK Hynix lost 7.35%, while battery makers and automakers also dropped.
Retail investors bought shares worth 7 trillion won, marking their biggest one-day purchase.
Foreigners sold local shares worth 3.7 trillion won, leading the losses on the index, while institutional investors were also net sellers.
The KOSPI, which had been on a world-beating, artificial intelligence-driven rally until before the war broke out, has fallen 13% so far this month. It is still up 28% this year-to-date.
The country’s benchmark 10-year yield jumped by 22.2 basis points to 3.880%, the highest since November 2023.