Tensions between the U.S. and Iran, Middle East risks causing fluctuations in the Korea Composite Stock Price Index?

The domestic stock market on the 20th faces renewed escalation of military and diplomatic tensions just before the end of the ceasefire between the U.S. and Iran, and volatility may increase after the opening. Once the Middle East situation shifts, international oil prices and risk asset preferences will fluctuate simultaneously, so the market’s sensitive reaction to external variables that day may surpass expectations for corporate performance.

On the previous trading day, the 17th, the Korea Composite Stock Price Index (KOSPI) closed at 6,191.92 points, down 34.13 points (0.55%) from the previous trading day. At the stock exchange, net selling by foreigners of 2.0031 trillion won led the index lower, while individuals and institutions net bought 1.4464 trillion won and 150.1 billion won respectively. Large semiconductor stocks also performed weakly. Samsung Electronics fell 0.69% to 216k won, SK Hynix dropped 2.34% to 1.13M won. Meanwhile, the KOSDAQ index rose 7.07 points (0.61%) to 1,170.04 points, showing relatively strong performance at close.

The core concern for market unease lies in the intense nerve war between the U.S. and Iran. Iran temporarily announced it would lift restrictions on passage through the Strait of Hormuz, seemingly reviving investor sentiment, but then the Iranian military announced it would tighten control over navigation through the strait again. Additionally, U.S. President Donald Trump pressured that if Iran does not reach an agreement, it could destroy its critical infrastructure, and early on the 20th Korea time, the U.S. announced it intercepted an Iranian cargo ship attempting to break through the maritime blockade in the Gulf of Oman and has taken control. Iran characterized this as a violation of the ceasefire agreement and hinted at possible retaliatory actions. The Strait of Hormuz is a key route for global oil transportation, and tensions in the region can easily lead to energy price and financial market turbulence.

In fact, international oil prices are also reacting quickly. Currently, the May delivery U.S. West Texas Intermediate (WTI) futures price is at $89.75 per barrel, up 7.04% from the previous trading day. Rising oil prices will heighten inflation concerns and increase corporate costs, putting pressure on the overall stock market. However, as of the 17th, the U.S. stock market performed strongly, with the Dow Jones Industrial Average rising 1.79%, the S&P 500 up 1.20%, and the Nasdaq Composite up 1.52%. The S&P 500 closed at 7,126.06 points, marking the first time in history it closed above 7,100, and the Nasdaq index has risen for 13 consecutive trading days. Tech stocks like Nvidia and Tesla rose, and the Philadelphia Semiconductor Index also increased by 2.43%. However, since this reflects investor sentiment formed before the escalation of tensions in the strait, whether this can similarly transmit to the domestic stock market remains uncertain.

The securities industry believes that the domestic stock market may fluctuate at the beginning of this week due to the intertwined risks in the Middle East and earnings season expectations. Future asset securities researcher Xu Xiangying pointed out that the progress of U.S.-Iran negotiations and international oil prices are key variables; Kiwoom Securities analyst Han Zhiying expects volatility to expand early in the week. However, since expectations for corporate earnings improvement still exist, some predict that the KOSPI may attempt to break through previous highs again in the midweek. Daxin Securities analyst Li Jingmin stated that even if there are additional fluctuations, intraday volatility is likely to stay around 5%, with 5,600 points being an important support zone. Ultimately, this trend will be influenced by the Middle East situation in the short term, but if negotiations progress and oil prices stabilize, the market focus may shift back to a performance-driven trend.