“The bond yields and the won-dollar exchange rate are showing excessive volatility compared with Korea’s economic fundamentals due to Middle East risks,” Bank of Korea Senior Deputy Governor Yoo Sang-dai said during an emergency meeting.
The comment came as oil prices surged amid expanding battle zones and fuel production disruptions across the Middle East, including the de facto closure of the Strait of Hormuz, a key artery for global oil shipments to Asia.
Market anxiety has also intensified after Iran named Mojtaba Khamenei, a hardline son of the slain supreme leader, as the country’s new leader — a move seen as signaling a prolonged conflict.
The U.S. dollar jumped to 1,495.50 won, approaching the psychologically important 1,500-won level for the first time since the aftermath of the global financial crisis on March 12, 2009.
The sharp move came as foreign and domestic institutions rushed to sell Korean assets. Foreign investors dumped more than 2 trillion won ($1.5 billion) worth of shares on the benchmark KOSPI in early trading.
Government bond yields also climbed in line with global markets, tracking a sharp rise in overseas rates, including nearly 10 basis points in the U.K. 10-year gilt yield.
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