The 'honeymoon rally' of the Korea Composite Stock Price Index (KOSPI) and Korea Securities Dealers Automated Quotations (KOSDAQ), which rose with the inauguration of the new government, ended with Israel's preemptive strike on Iran. The impact on the market is expected to vary depending on the responses from both Israel and Iran.
The KOSPI closed at 2,894.62 on the 13th, down 25.41 points (0.87%) from the previous day. The KOSDAQ also finished at 768.86, down 20.59 points (2.61%). Both indexes closed lower for the first time in eight trading days since the 2nd.
In the KOSPI market, 766 stocks fell, while only 150 stocks closed higher than the previous day. Even among the top 10 by market capitalization, most stocks, including Samsung Electronics, Samsung Biologics, LG Energy Solution, and Hyundai Motor, experienced a decline. Only KB Financial and HD Hyundai Heavy Industries saw their stock prices rise.
In the KOSDAQ market, 1,415 stocks fell and 254 stocks gained. All top 10 stocks by market capitalization, including the leading stock Alteogen, EcoproBM, HLB, and Ecopro, finished lower. PharmaResearch, which announced a spin-off for a restructuring of its holding company system, saw its stock price plummet by 17.11%.
This was the aftermath of the clash between Israel and Iran. Early that morning, Israel initiated what it called the 'Lion's Awakening' operation, targeting Iran's nuclear facilities and military sites. Iran launched retaliatory strikes using drones and cruise missiles.
The key question is whether the clashes between Israel and Iran will prolong. In April and October of last year, Israel and Iran exchanged attacks, but those conflicts remained short-term. However, there are views that this time may be different.
Choi Ye-chan, a researcher at Sangsangin Investment & Securities, noted that the differences lie in the following points: Israel's target includes not only Iran's military facilities but also nuclear facilities; both Israel and Iran have expressed willingness to continue retaliatory strikes; and unlike the previous government, the Trump administration in the U.S. is strongly supporting Israel.
Researcher Choi stated, "Since news of the death of a senior Iranian official has been reported, retaliatory attacks are inevitable." He added, "If it ends as a one-time conflict without further retaliation from Israel, the impact on the financial market will be limited. However, if Israel retaliates again, the worst-case scenario of blocking the Strait of Hormuz could materialize."
The Strait of Hormuz is a narrow passage between the Persian Gulf and the Gulf of Oman, through which 20% of the world's crude oil trade passes. If Iran acts to block the Strait of Hormuz, there is a high possibility that international oil prices will skyrocket. Particularly, Korea imports 70% of its crude oil through the Strait of Hormuz.
Global investment bank JP Morgan presented a base scenario of $74 per barrel for West Texas Intermediate (WTI) crude oil, yet projected that it could rise to $120 per barrel in the worst case. If international oil prices rise, inflation concerns could resurface, acting as a burden on the market.
On the other hand, there are opinions pointing out that Iran, being militarily disadvantaged compared to Israel, may be constrained in its actions. Kim Sung-geun, a researcher at Mirae Asset Securities, stated, "The fact that Israel could attack Iran's key facilities without taking significant damage is itself a disadvantageous signal for Iran" and added, "While Iran must take strong measures, it may become trapped in a dilemma with limited viable options." He noted, "From the U.S. perspective, which is concerned about inflation, further escalation is also undesirable."
The fact that foreign investors, who have driven the rise in the domestic stock market, have not engaged in a panic sell-off is seen as a positive point. On this day, institutions in the KOSPI market showed a net selling of 611.2 billion won. Individuals purchased a net of 467.2 billion won, and foreign investors, who had previously engaged in a sell-off, returned to buying with a net purchase of 121.2 billion won.
Lee Kyung-min, a researcher at DAISHIN SECURITIES, stated, "Geopolitical risks generally affect short-term investment sentiment but do not change the long-term direction of the financial market," and noted, "Considering the recent rapid rise in the domestic stock market, the significant drop can be interpreted as profit-taking pressure."
He added, "In the KOSPI market, it was the institutional investors who led the decline, while foreign investors sold off from the machinery and equipment sector, which had seen significant gains, and adjusted their positions by purchasing in the electrical, electronics, and financial sectors."