The KOSPI, the benchmark index of the Korea Exchange, shed 186.82 points or 2.7 percent to 6,648.98 in early trade on Wednesday. The selloff panned out on a similar scale in Tokyo, also weighed down by bond and oil market jitters.
Chipmakers, carmakers and power equipment names took the worst of it, while shipping and refining shares were the only sizeable group bid higher.
U.S. Central Command said its forces began striking Islamic Revolutionary Guard Corps targets in Iran on Tuesday, after two tankers were hit within minutes of each other while leaving the strait late Monday.
President Donald Trump called the strikes "large and powerful."
One of the two vessels, the Liberia-flagged Senegal Prosperity, is South Korean-owned.
West Texas Intermediate crude settled 5.2 percent higher at $90.22 a barrel, its highest close in more than a month. Brent added 4.6 percent to $94.65.
The Middle East supplied 53.1 percent of Korea's crude imports in April, down from 65.2 percent a year earlier, according to the Korea International Trade Association, a national trade body that compiles customs data.
The transmission into equities runs through bonds rather than through the oil price itself.
Long-dated yields rose in the U.S. and abroad on Tuesday as traders priced a higher inflation path and questioned whether the Federal Reserve could tighten later this month.
Japan's 10-year bond yield on Tuesday touched 3 percent for the first time since 1996, while Korea's also neared multi-year highs by adding 5.8 basis points to 4.317 precent, moving closer to 4.75 percent yield of U.S. treasury note of corresponding maturity.
Semiconductors, which carry the index, lost the most market value. Samsung Electronics fell 3.1 percent to 253,000 won ($184), and SK hynix lost 2.9 percent to 1,644,000 won ($1,198).
SK square, the holding company that is SK hynix's largest shareholder, dropped 5.2 percent to 1,012,000 won ($738).
Hyundai Motor fell 3.9 percent to 385,000 won ($281).
The bid was narrow. Shipping was the strongest theme on the market, up 3.3 percent, with traders reading war risk premiums and longer routes as support for freight rates.
Banks also held up, helped by the same yield move that hurt technology. KB Financial Group rose 0.7 percent to 172,400 won ($126) and Shinhan Financial Group added 0.5 percent to 111,700 won ($81).
The KOSDAQ, the secondary market for smaller and technology companies, fell 19.26 points to 801.99, a loss of 2.4 percent.
Individual investors were the only net buyers on the main board, taking a net 293.8 billion won ($214.2 million) of shares.
Foreigners sold a net 203.0 billion won ($148.0 million) and institutions a net 128.7 billion won ($93.8 million).
In Tokyo, the Nikkei 225 was down 1,544.32 points at 64,671.02, a loss of 2.3 percent.
The won was quoted at 1,371.60 to the dollar, 3.90 won stronger than the previous quote.
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