Market data compiled by the Financial Supervisory Service show that Korean assets underperformed most major markets across multiple indicators — stocks, foreign capital flows, exchange rates and sovereign yields — highlighting how exposed the export-driven economy remains to disruptions in the Strait of Hormuz, the narrow waterway through which roughly one-fifth of the world’s oil shipments pass.
The benchmark KOSPI fell 10.56 percent from the end of February to early March, the steepest decline among major global indices tracked by regulators. The secondary KOSDAQ lost 3.20 percent.
Over the same period, Japan’s Nikkei 225 dropped about 5.49 percent, Taiwan’s TAIEX roughly 5.12 percent, while the Euro Stoxx 600 slipped around 4.48 percent. U.S. equities showed far milder reactions, with the S&P 500 down less than 1 percent over the same window.
The scale of the decline reflects the structure of the Korean market, which is dominated by cyclical exporters such as semiconductor manufacturers, automakers and shipbuilders — sectors highly sensitive to global trade conditions and energy prices.
Foreign investors accelerated their withdrawal from Korean equities as geopolitical risks mounted. Data show that overseas investors have sold a net 8.1 trillion won ($6 billion) in Korean stocks in March.
On March 6 alone, foreigners dumped more than 2.4 trillion won of KOSPI shares, highlighting the speed with which global funds exit Korean assets during periods of uncertainty.
The Korean won also emerged as one of the weakest and most volatile major currencies in the early phase of the crisis.
According to Bank of Korea data, the average daily fluctuation in the won–dollar exchange rate reached 13.2 won in early March, the highest level of volatility since the panic of March 2020 during the COVID-19 pandemic.
The currency weakened 2.6 percent against the dollar over the week, compared with a 1.04 percent decline in the Japanese yen, while the dollar index gained 1.75 percent over the same period.
At one point in overnight trading, the exchange rate surged to 1,505.8 won per dollar, briefly breaching the psychologically important 1,500 level for the first time since the global financial crisis in 2009.
Currency swings were particularly pronounced during overnight trading hours when market liquidity is thinner and official intervention is more limited, allowing relatively small orders to move prices sharply.
The divergence with Japan has been notable. While the Japanese yen historically strengthened during global crises as a safe-haven asset, the current war shock has instead pushed the yen weaker to around ¥158 per dollar, its softest level in about six weeks. Analysts attribute the move to Japan’s own heavy dependence on imported oil and expectations of rising dollar demand for energy payments.
Still, the won has weakened more sharply than the yen, reinforcing its reputation among global investors as a high-beta currency that tends to amplify swings in global risk sentiment.
Bond markets also reflected rising stress.
The yield on three-year Korean Treasury bonds climbed to 3.227 percent, while the 10-year yield rose to 3.616 percent, increases of nearly 20 basis points from late February, roughly in line with the rise in U.S. Treasury yields but far exceeding the 5.4 basis-point increase in Japan’s 10-year government bond.
Corporate borrowing costs rose even faster, with yields on three-year AA-rated corporate bonds breaching 3.8 percent, indicating a widening risk premium in domestic credit markets.
Underlying the turbulence is South Korea’s structural dependence on Middle Eastern energy.
The country imports the vast majority of its crude oil from the region, much of it transported through the Strait of Hormuz. Any prolonged disruption to tanker traffic there could quickly feed through to domestic fuel prices, manufacturing costs, inflation and the trade balance.
Japan faces a similar reliance on imported energy, but its markets proved more resilient during the initial shock. Analysts attribute the difference partly to the relatively larger role of domestic institutional investors in Japan and the yen’s residual reputation as a defensive asset.
Oil prices have surged in tandem with the conflict. WTI crude jumped 20.87 percent from late February and 41 percent from the end of 2025, while Dubai crude gained 7.67 percent over the week and 26.6 percent from late December. Brent crude rose 17.84 percent in a week and 40.3 percent from the end of last year.
The instability underscores how deeply South Korea is integrated into global capital flows and commodity markets. Korean assets are often treated as a liquid proxy for investor sentiment toward global growth and emerging markets — making them particularly vulnerable when geopolitical risks spike.
For investors and policymakers alike, analysts say the trajectory of markets will ultimately hinge on a single variable: the duration of the conflict and whether oil shipments through the Strait of Hormuz return to normal.
If disruptions persist and crude prices push toward $100 per barrel, the financial turbulence seen in the first week of the war could deepen into a broader economic shock — one that would be felt most acutely in energy-importing economies like Korea.
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