KOSPI Plunges Over 8% as U.S.-Iran War Sparks Global Risk Aversion and Profit-Taking

South Korea’s KOSPI index tumbled sharply on Wednesday, falling more than 8% and triggering a temporary halt in stock trading as investors reacted to escalating geopolitical tensions and rising energy prices linked to the U.S.-Iran war. The sudden decline highlights growing market volatility and risk aversion across global financial markets.

The KOSPI dropped 8.1% to 5,322.93 points during early trading, activating a sell-side circuit breaker that paused trading for 20 minutes. The steep decline followed another heavy sell-off on Tuesday, when the benchmark index fell 7.2% after retreating from record highs reached just last week.

Market analysts noted that the sell-off was largely driven by profit-taking after South Korean equities posted strong gains earlier this year. Investors moved to secure profits as geopolitical risks intensified following the outbreak of the U.S.-Iran conflict over the weekend. Concerns about supply disruptions and higher oil prices also fueled fears of rising inflation, further dampening market sentiment.

Technology and industrial stocks, which were key drivers of the KOSPI’s strong rally earlier in 2026, led the market decline. Semiconductor giants Samsung Electronics and SK Hynix saw their shares drop significantly, falling 6.5% and 4.7% respectively. Both companies had recently reached record highs before the sudden downturn.

Automaker Hyundai Motor experienced even steeper losses, with its stock plunging nearly 10% during the sell-off. The broader technology sector also faced additional pressure after reports indicated that Samsung Electronics had postponed mass production at its planned semiconductor plant in Taylor, Texas, pushing the expected start date to 2027 from the previously anticipated 2026 timeline.

Selling pressure came from both domestic and foreign investors, while institutional buying remained limited and failed to stabilize the market. The lack of strong support accelerated the downward momentum in Korean equities.

Despite the sharp correction, the KOSPI had posted impressive gains earlier in the year. The benchmark index surged approximately 26% during the first two months of 2026, fueled largely by strong optimism surrounding artificial intelligence growth and semiconductor demand. However, the recent geopolitical shock and rising energy costs have quickly shifted investor sentiment toward caution.