By Kwanwoo Jun
South Korea's benchmark index had its worst day ever, triggered by fear of higher energy prices and the possible effect on the country's technology champions.
The drop came in a standout year for the Seoul market, thanks mainly to the artificial-intelligence boom. Memory-chip maker SK Hynix and all-around tech leader Samsung Electronics, which has a big chip business, have more demand for their chips than they can handle.
They have been jacking up prices and making a mint, taking the stock market up with them because those two companies are by far the biggest in South Korea by market capitalization.
Market watchers had been wondering what might trigger a correction. The answer came over the weekend, when the Middle East conflict drove up oil and natural gas prices.
The benchmark Kospi index fell 7.2% on Tuesday, when South Korean markets reopened after a three-day weekend, and an additional 12% on Wednesday, its steepest-ever daily drop. Fears of a prolonged closure of the Strait of Hormuz, a key waterway for oil shipments, accelerated Wednesday's fall. The stock-market operator suspended trading twice to cool volatility.
South Korea relies on imported oil and liquefied natural gas to power its economy and exports, and chip factories are especially heavy users of electricity.
In Japan, which also relies on fossil-fuel imports from the Middle East but has a more diversified economy, stocks fell less dramatically this week. The Nikkei Stock Average finished 3.6% lower Wednesday.
"As Korea depends heavily on external oil and gas, terms of trade should deteriorate with higher commodity prices," said ING economist Min Joo Kang.
DBS economist Ma Tieying estimated that a 10% rise in oil prices could reduce South Korea's GDP growth by 0.2 to 0.4 percentage point.
Still, it could be worse. Even after the two-day bloodbath, the Kospi index is up 21% this year and about double its year-ago level.
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(END) Dow Jones Newswires
March 04, 2026 06:56 ET (11:56 GMT)
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