Seoul: South Korea's Kospi index experienced a significant drop of more than 12% on Wednesday, before regaining some ground, as Asian markets were hit hard due to the escalating conflict in the Middle East.
According to Anadolu Agency, the Korea Exchange temporarily halted trading in the Kospi, while the Kosdaq index saw a circuit breaker triggered after a drop of approximately 13%. The Kospi later traded about 8% lower, with major technology firms such as SK Hynix and Samsung Electronics experiencing declines of over 6% and 9%, respectively.
The current market downturn follows a period of strong growth in South Korean equities last year, during which the Kospi surged by over 75%, largely propelled by semiconductor companies benefiting from high demand for memory chips. However, South Korea's manufacturing-heavy economy is vulnerable to energy costs. Rising oil prices, exacerbated by the Middle East conflict, have raised concerns about potential pressure on the industrial and export sectors. The nation's net oil imports constitute roughly 2.7% of its GDP.
In other parts of Asia, Japan's Nikkei 225 fell by 3.6%, and the Shanghai Composite decreased by 1%. Australia's S and P/ASX 200 saw a decline of more than 2%, Hong Kong's Hang Seng dropped around 2.7%, and China's CSI 300 slipped by 1.6%.
Investors are also paying close attention to China's significant annual political event, the 'Two Sessions,' where policymakers are expected to announce key economic objectives. Chinese Premier Li Qiang is set to present growth and policy goals at the National People's Congress, which opens on Thursday.
Oil prices continued to rise as the Middle East conflict intensified. Brent crude increased by 0.95% to $82.17 per barrel, amid fears over Iran's actions to potentially block the Strait of Hormuz. A senior commander of Iran's Revolutionary Guard announced the closure of the strategic waterway, warning that any vessel attempting passage would be targeted.
In response, US President Donald Trump stated that the US could provide naval escorts for tankers transiting the strait if necessary. In a post on Truth Social, Trump asserted that the US would ensure global energy flows, highlighting the nation's economic and military prowess, and indicated that additional measures could be taken.
Meanwhile, precious metals saw an uptick as investors turned to safe-haven assets. Spot gold rose by 1.64% to $5,170 per ounce, while spot silver surged nearly 3% to $84.49 per ounce.