Kospi falls more than 2% as Middle East tensions drive oil and bond yields higher

The Kospi fell more than 2% in early trading on the 2nd as renewed tension in the Middle East sent oil prices and government bond yields sharply higher.

The benchmark opened down 3.08% at 6,625.47 and stood 2.47% lower at 6,667.21 at 10:03 a.m. Samsung Electronics fell 2.87% to 253,500 won, while SK Hynix dropped 2.89% to 1.644 million won. Of the companies listed on the main market, 709 declined and 170 rose. KB Financial and Shinhan Financial were among the few gainers, with bank shares up about 1%.

The market move followed a military clash between the United States and Iran. The United States carried out a large-scale airstrike on southern Iran on the 1st, according to the report, and Iran retaliated by launching missiles and drones at U.S. military bases in the Middle East. International oil prices then rose by roughly 5%.

West Texas Intermediate crude for October delivery settled 5.2% higher at $90.22 a barrel on the New York Mercantile Exchange. Brent crude for November delivery finished 4.6% higher at $94.65 on London’s ICE Futures Exchange.

Higher oil prices revived inflation concerns, while fiscal pressures also pushed up long-term bond yields in the United States, Japan and Britain. Kiwoom Securities researcher Han Ji-young said sensitivity to macroeconomic factors such as oil prices and interest rates had increased. U.S. stocks also fell overnight, with the Nasdaq down 1.03%, the S&P 500 down 0.71% and the Dow Jones Industrial Average down 0.79%. The Kosdaq was 0.90% lower at 813.89 after briefly falling below 800.

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Sensitivity to macroeconomic variables such as oil prices and interest rates has increased.