THE Kospi has endured its worst two-day collapse since 2008 as global markets are hit during the Middle East war with experts warning “European and US markets will suffer”.
Asian stock markets overnight were hit by panic selling as the war intensified between the US, Israel and Iran, sparking fears of rising energy prices and inflation.
Trading on South Korea’s benchmark index, the Kospi, endured its worst two-day collapse since the global financial crisis in 2008 and it was even temporarily halted as it suffered losses of more than 12%.
Oil prices rose another 2% to more than $83 a barrel after Israel launched a series of fresh attacks against Iran and Hezbollah in Lebanon.
Asian tech giants Samsung, down 11.7%, and SK Hynix, down 9.6%, fell heavily as the conflict threatened a surge in energy prices.
Japan, which depends on imports of oil and gas from the Persian Gulf, was also hit, with its benchmark Nikkei 225 down by 3.6%.
European and US markets will suffer
Riz Malik, Director at Southend-on-Sea-based R3 Wealth, warned that markets in the UK and the US will also be hit by the war.
He added: “Asia is right to be uneasy about the risk of an energy shock. With no clear plan or roadmap from the US President on how these hostilities might end, markets are left guessing. If oil and gas prices keep climbing, the pressure will not stop at Asia.
“European and US markets will also start pricing in the risk of a longer conflict. Reports of Iran reaching out to Washington over the weekend raised hopes briefly, but recent rhetoric suggests a quick resolution remains unlikely.”
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based Pattrn Data, said this uncertainty could spread across the globe.
He added: “This is not a Korea story. It is a reminder that geopolitics is back in the pricing model. When markets move 10 plus per cent in two days, it is usually less about fundamentals and more about forced de-risk: leverage unwinds, risk limits trip, and everyone heads for cash at once. The UK impact is likely to come via energy and confidence.
“A sustained oil move pushes inflation expectations up, squeezes consumers, and makes rate cuts harder. It also hits firms with fragile supply chains, especially anything energy intensive, transport heavy, or dependent on imported components.
“For the rest of the week, watch oil, shipping insurance, and credit spreads more than equities. If those stabilise, the bounce can be sharp. If they keep widening, expect more circuit breakers, more ‘safe haven’ rotation, and more pain in growth and tech.”
Iran is the catalyst
Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, said the sell-off isn’t just because of war in Iran.
He added: “Iran is the catalyst here, but an over-hyped AI bubble is the real reason for the sell-off. Once the Iranian conflict is resolved one way or another there won’t be a bounce back in the KOSPI or other AI stocks, like there will be in other sectors.
“Physiologically, investors needed a kick to take profits, and this was it.”
