South Korea’s benchmark stock index, the Korea Composite Stock Price Index (KOSPI), plunged sharply on Wednesday, March 4, as global markets reacted to escalating geopolitical tensions and a surge in energy prices.
The index was trading around 5,163.68, down 628.24 points or 10.85%, reflecting one of the steepest declines in recent years.
War-driven market panic
The selloff is largely tied to the escalating conflict involving Iran, which has triggered widespread risk aversion across global markets. Concerns about disruptions in the Strait of Hormuz, a key shipping route handling nearly 20% of global oil flows, have pushed oil prices sharply higher.
Higher energy prices pose a major threat to South Korea’s economy because the country is one of the world’s largest oil importers. Rising oil costs can increase inflation, reduce corporate margins and weaken industrial output, leading investors to pull money out of equities.
Global risk-off sentiment
The geopolitical escalation has triggered a broader “risk-off” move across financial markets. Asian equities have weakened while investors have shifted toward safer assets amid uncertainty around energy supply and global economic stability.
At the same time, a stronger US dollar and concerns that central banks may delay rate cuts due to higher inflation risks have added further pressure on emerging market assets.
Tech heavyweights dragging the index
The KOSPI is heavily influenced by major technology and semiconductor companies. Stocks such as Samsung Electronics and SK Hynix, which led the index’s rally earlier this year, have fallen sharply amid profit-taking and concerns about rising energy and production costs.
Because these companies carry significant weight in the index, their declines have amplified the overall drop.
Foreign investor selling intensifies
Foreign investors have reportedly accelerated selling in South Korean equities, while the Korean won has weakened to multi-year lows against the US dollar. The currency pressure has further reduced investor confidence and contributed to the market decline.
Sharp reversal after strong rally
The selloff also marks a dramatic reversal from the earlier rally seen in 2026, when the KOSPI surged to record highs above 6,000 driven by strong global demand for artificial intelligence and semiconductor stocks.
With geopolitical tensions still unfolding, markets are expected to remain volatile as investors track oil prices, shipping disruptions and broader developments in the Middle East conflict.