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Kospi posts biggest drop ever at over 12% as Middle East instability spurs sell-off

Published: 04 Mar. 2026, 19:32 Updated: 04 Mar. 2026, 19:40

The Kospi and dollar-exchange rate is shown on a screen at Hana Bank's trading room in central Seoul on March 4. [YONHAP]

The Kospi plunged more than 12 percent on Wednesday in its biggest one-day drop on record, as escalating conflict in the Middle East rattled investors and triggered a market-wide sell-off.

The benchmark index, previously the world’s fastest-growing major bourse this year, closed down 698.37 points, or 12.06 percent, at 5,093.54 on Wednesday. The decline surpassed the previous record set during the Sept. 11 terrorist attacks in 2001, when the Kospi fell 12.03 percent on a single day.

Wednesday marked a second straight session of record losses in points after falling 452.22 points on Tuesday.

The tech-heavy Kosdaq slid 159.26 points, or 14 percent, to close at 978.44.

Major stocks led the losses. Market bellwether Samsung Electronics plummeted 11.74 percent to 172,200 won ($117), while SK hynix dropped 9.58 percent to 849,000 won. Most other large-cap shares including Hyundai Motor and Kia also declined.

Trading was even briefly halted after authorities triggered a circuit breaker that suspended trading on both the Kospi and Kosdaq for 20 minutes. It marked the first time the mechanism was activated simultaneously in both markets since Aug. 5, 2024, when stocks plunged amid fears of a U.S.-led economic slowdown and turmoil linked to the yen carry trade.

Bloomberg said the two-day drop marked the biggest crash since the global financial crisis in 2008.

Large fire and plume of smoke is visible after, according to the authorities, debris of an Iranian intercepted drone hit the Fujairah oil facility, in Fujairah, United Arab Emirates, onMarch 3, 2026. [AP/YONHAP]

Investor sentiment weakened on fears that the Iran war, triggered by U.S. and Israeli strikes on Iran on Saturday, could drag on and expand to the larger Middle East region.

Concerns over global oil and gas supplies also grew after Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy said Wednesday it had claimed control of the Strait of Hormuz, a key shipping route for about 20 percent of the world's oil and one-third of its liquefied natural gas.

"Considering the IRGC Navy's repeated warnings that the Strait of Hormuz is unsafe, more than 10 oil tankers, which ignored these warnings, were hit by various missiles and burned," Mohammad Akbarzadeh, political deputy of the IRGC Navy, said as quoted by the Iranian news agency Fars.

Foreign exchange rates are displayed at a screen at a currency exchange in Myeong-dong, Jung District, central Seoul, on March 4. [NEWS1]

The won also weakened sharply due to the war. In after-hours trading, the local currency traded above 1,500 per dollar — the first time it has crossed that level since March 2009 during the global financial crisis.

Analysts said geopolitical risks could keep markets volatile in the near term.

Han Ji-young and Lee Seong-hoon, analysts at Kiwoom Securities, said tensions in the Middle East remain ongoing and could continue to drive market swings through the rest of the week.

They added that it is too early to call a sustained market downturn.

Customers fill up their cars as others wait in a line at a gas station in Seocho District, southern Seoul, on March 4. [NEWS1]

“Given the solid earnings fundamentals of leading stocks including chips, government support measures for the stock market and demand to buy on dips, it is premature to discuss a structural downturn in the index," the analysts said.

“At this stage, maintaining existing positions or buying leading stocks that have fallen excessively could be more beneficial than reducing exposure in panic selling.”

The Kospi had been the best-performing major market earlier this year before the sell-off. From the start of the year through last Friday, the index rose 48.17 percent, the largest gain among major global indexes and more than double the 22.27 percent rise in Taiwan, the second-best performer.

It fell 7.24 percent on Tuesday — the first trading session after war broke out between the United States, Israel and Iran — marking the steepest drop among global markets that day.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JANG SEO-YUN [[email protected]]