The benchmark KOSPI fell 6.26 percent to 8,098.52 in early trade, while the junior KOSDAQ dropped 4.65 percent to 1,000.9.
The won also weakened further, trading at 1,531.70 against the dollar, compared with a previous close of 1,529.70.
Semiconductor-related shares remained under heavy selling pressure despite expectations surrounding Nvidia CEO Jensen Huang's visit to Seoul later in the day and potential cooperation with local tech firms.
Samsung Electronics fell 7.18 percent to 326,250 won and SK Hynix dropped 8.83 percent to 209,500 won, with Samsung's preferred shares losing 5.45 percent to 208,000 won and SK Square sliding 9.40 percent to 123,300 won.
Samsung Electro-Mechanics slipped 4.37 percent to 1,641,000 won, LG Energy Solution fell 2.96 percent to 409,500 won, Samsung Life Insurance lost 9.02 percent to 398,500 won, Samsung C&T tumbled 16.73 percent to 445,500 won and Doosan Enerbility declined 6.15 percent to 93,100 won. Samsung Biologics was relatively resilient, edging down 0.74 percent to 1,340,000 won.
Automakers also came under pressure. Hyundai Motor fell 6.00 percent to 658,000 won, Kia declined 4.93 percent to 156,200 won and Hyundai Mobis dropped 9.22 percent to 679,000 won.
Among the gainers, HD Hyundai Heavy Industries rose 0.61 percent to 655,000 won, and KB Financial Group gained 3.59 percent to 170,100 won, bucking the broader market downturn.
The retreat came despite another record-setting session for major U.S. equity benchmarks. The Dow Jones Industrial Average rose 1.73 percent to close at an all-time high of 51,561.93, and the S&P 500 gained 0.41 percent. The tech-heavy Nasdaq Composite, however, slipped 0.09 percent as investors rotated out of high-flying semiconductor names and into sectors that had lagged the broader rally.
The biggest losses were seen in semiconductor stocks. Broadcom plunged 12.59 percent after its quarterly results failed to meet investors' high expectations. Memory-chip maker Micron Technology dropped 7.74 percent, and SanDisk lost 3.92 percent. The Philadelphia Semiconductor Index fell 2.15 percent.
But easing geopolitical concerns over the prolonged Middle East conflict helped cushion broader market losses, as lower oil prices would ease inflationary pressures and support equities outside the technology sector.
U.S. West Texas Intermediate crude futures fell 3.1 percent to $93.04 a barrel, and Brent crude declined 2.8 percent to $95.03. U.S. Treasury yields edged lower, with the benchmark 10-year yield slipping to 4.47 percent as weaker economic data and falling oil prices eased inflation concerns.
Meanwhile, Asian markets were mostly lower. Japan's Nikkei 225 dropped 1.43 percent to 66,505.61, Hong Kong's Hang Seng Index lost 0.41 percent to 25,148.76, while China's Shanghai Composite bucked the trend, rising 0.17 percent to 4,064.85.
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