South Korean stocks suffered a historic collapse on Wednesday, with the KOSPI index plunging 12.1%, marking its worst single-day performance ever. The steep decline, surpassing even the crash following the September 11 attacks, was fueled by growing anxieties over surging energy prices stemming from escalating tensions in the Middle East. The tech-heavy KOSDAQ index fared even worse, plummeting 14%.
The energy crisis has hit South Korea particularly hard due to its heavy reliance on imported fossil fuels, with approximately 70% of its crude oil sourced from the Middle East. The disruption of supply routes, coupled with rising crude prices, has triggered concerns about increased manufacturing costs and reduced export competitiveness, severely impacting the export-driven Korean economy. The Korean won also slid to a 17-year low.
The market rout extended beyond South Korea, with Japan's Nikkei 225 dropping 3.9% and other Asian markets also feeling the pressure. Major South Korean companies like Samsung Electronics and SK Hynix experienced significant losses, falling 11.7% and 9.6% respectively. The crash triggered circuit breakers on the Korea Exchange, temporarily halting trading amidst panic selling.
Analysts caution that sustained high energy prices could significantly impact South Korea's GDP growth and inflation. The situation remains volatile, with investors closely monitoring developments in the Middle East and their potential impact on global energy markets.
