Korean Stocks Plummet on Trump's Threat of Further Iran Attacks

South Korea's financial market experienced sharp fluctuations following US President Donald Trump's warning of further attacks on Iran. The market, which had shown a trend of 'triple stability'—the so-called simultaneous drop in exchange rates and interest rates, driven by hopes of ending the conflict and expectations of foreign bond fund inflows from the inclusion of Korean government bonds in the World Government Bond Index (WGBI)—reverted to a phase of uncertainty overnight.

In a televised address to the nation from the White House on the 1st (local time), the 33rd day of the conflict with Iran, President Trump declared, "We will launch massive attacks against Iran in the next two to three weeks, turning it back to the Stone Age." He identified Iran's essential infrastructure and power plants as targets and indicated that he could not rule out an expansion of military conflict, stating that no agreement had been reached despite ongoing negotiations between the two countries. Furthermore, he emphasized that other countries must directly take responsibility for protecting the Strait of Hormuz.

The won-dollar exchange rate opened at 1512 won per dollar, up 10.9 won from the previous week's closing price, and surged to 1520 won as of 11:20 AM. The rate, which had plunged nearly 30 won the previous day on hopes of a ceasefire, turned sharply upward again.

The KOSPI opened 72.99 points (1.33%) higher at 5551.69 but turned downward during the session, falling to 5271.92. The KOSDAQ also dropped to 1071.16 after opening higher. Foreign investors revealed their risk-averse sentiment by net selling 327.1 billion won worth of stocks on the KOSPI and 136.3 billion won on the KOSDAQ.

Concerns grew over the South Korean economy, which is highly dependent on energy imports, as the Strait of Hormuz, through which about 20% of the world's crude oil is transported, emerged as the center of the conflict.