Last night, $韩国ETF-iShares MSCI(EWY)$ plunged 7%, far exceeding the 0.48% decline in the KOSPI index.
Why did this happen?
It was likely influenced by the sharp sell-off in the U.S. market overnight. The $纳斯达克(.IXIC)$ fell nearly 1.8%.
The decline in U.S. equities was driven by escalating tensions between the United States and Iran. Donald Trump stated that preventing Iran from obtaining nuclear weapons is more important than keeping oil prices low. Meanwhile, Iran’s new supreme leader Mojtaba Khamenei signaled an intention to ensure the Strait of Hormuz remains effectively closed.
As a result, the market is beginning to price in the risk that if shipping routes have not resumed by the end of March, oil prices could surge to record highs, potentially reaching 150 dollars per barrel.
Under such circumstances, the probability of Federal Reserve rate cuts this year could fall close to zero, which would put additional pressure on U.S. equities. Technology stocks have already been hit, with $台积电(TSM)$ dropping 5%.
Nearly half of the Korean stock market’s weight is concentrated in Samsung Electronics and SK Hynix. Once technology stocks decline, Korean indices are bound to follow.
In this context, the trajectory of a potential U.S.–Iran conflict may determine the short-term direction of the Korean stock market. If geopolitical tensions ease, the market could see a short-term rebound.
Related ETFs and leveraged products include: $PLUS Korea Defense Industry Index ETF(KDEF)$ $Franklin FTSE South Korea ETF(FLKR)$ $Franklin FTSE South Korea ETF(FLKR)$ $Direxion Daily MSCI South Korea Bull 3x Shares(KORU)$
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