Black Monday. South Korea Stocks and Currency Slump as Korean Stocks Fall Over 5% Triggering Circuit Breaker and Won Hits 17-Year Low

TradingKey - On Monday, March 23, Asian markets collectively experienced a "Black Monday," with the South Korean benchmark KOSPI index plunging over 6% at one point, hitting a low of 5,409.17. Just 18 minutes into the session, KOSPI 200 futures plummeted 5%, triggering a circuit breaker that suspended program trading for five minutes.

During early trading today, South Korea suffered a "double whammy" in its equity and currency markets. As the KOSPI tumbled, the South Korean won fell to its lowest level against the U.S. dollar since the global financial crisis, slipping below the 1,510 mark to a near 17-year low. Amid escalating hostilities, safe-haven capital accelerated into assets such as the U.S. dollar and Treasuries.

Among the components of the KOSPI index, Samsung Electronics and SK Hynix were the largest drags on the benchmark. Samsung fell nearly 6%, while SK Hynix dropped over 6.5%. Other heavyweights, including Hyundai Motor and LG Energy Solution, also followed the downward trend.

The primary reason is the escalation of conflict in the Middle East. Over the weekend, U.S. Treasury Secretary Bessent stated that the U.S. is destroying various Iranian facilities and is considering measures such as deploying U.S. forces to control Iran's oil hub, Kharg Island. Donald Trump issued a threat demanding that Iran fully open the Strait of Hormuz within 48 hours, or the U.S. would strike and destroy power plants across Iran.

South Korea relies on imports for 81% of its total energy consumption, with more than 70% of that coming from the Middle East. Consequently, the spike in oil prices resulting from the escalating conflict will directly push up inflationary pressures in South Korea and heighten economic uncertainty.

According to Yonhap News Agency, on March 22, South Korean Finance Minister Koo Yun-cheol called for proactive policy measures during an inter-departmental meeting on the Middle East crisis to prepare for a prolonged situation. The government is accelerating the formulation of various policy measures to minimize the impact of the conflict on the markets and the broader economy. A spokesperson for the ruling party stated that South Korea will draft a supplementary budget of approximately 25 trillion won.

Japan relies on imports for 87% of its total energy consumption and has been similarly affected, with its stock market also taking a significant hit. On Monday, futures for Japan's TOPIX Growth Market 250 Index triggered a circuit breaker.

According to NHK, Japan will allocate approximately 800 billion yen from its budget reserves to suppress gasoline prices. The Bank of Japan noted that Japan's core CPI may briefly fall below 2%, but will re-accelerate later due to the impact of rising oil prices. Goldman Sachs estimates show that if the disruption of oil shipments through the Strait of Hormuz lasts for 60 days, the Japanese economy will undergo a temporary contraction.