[Good Morning Stock Market] Israel Withdraws Retaliation... "Safe Haven Demand↑, KOSPI Expected to Start Lower"

International Oil Prices Start Firm in Asian Trading
Exchange Rate Nears 1,400 Won Threshold

[Photo by Yonhap News]

On the 15th, the Korean stock market is expected to open lower. This is due to increased demand for safe-haven assets amid rising geopolitical tensions following Iran's airstrike on Israel. However, it is fortunate that concerns over escalation are easing as Israel has withdrawn its plans for further retaliation.

On the 12th (local time), the Dow Jones Industrial Average closed at 37,983.24, down 475.84 points (1.24%) from the previous trading day. The Standard & Poor's (S&P) 500 index fell 75.65 points (1.46%) to 5,123.41, and the tech-heavy Nasdaq index dropped 267.10 points (1.62%) to 16,175.09.

The decline in the U.S. stock market was driven by the conflict between Iran and Israel. On the 13th (local time), Iran launched hundreds of ballistic and cruise missiles at Israel, attacking its mainland. This was a military retaliation following the Israeli airstrike on the Iranian consulate in Syria on the 1st, which killed senior Islamic Revolutionary Guard Corps (IRGC) officials including General Mohammad Reza Zahedi.

Although Israel had threatened further retaliation, raising fears of escalation, The New York Times (NYT) reported on the 14th (local time) that Israeli Prime Minister Benjamin Netanyahu retracted this after a phone call with U.S. President Joe Biden. Iran also announced on the same day through T?rkiye that it would cease further attacks.

The market is closely watching international oil prices and exchange rates. International oil prices started slightly higher. The global benchmark Brent crude was trading at $91.05 per barrel, up 0.7% in early Asian trading.

Park So-yeon, a researcher at Shin Young Securities, explained, "Israel has expressed a 'limited' retaliation policy, and the U.S. has stated it will assist in Israel's defense but will not participate in retaliatory attacks, which has eased concerns over escalation. Although international oil prices are starting higher, the increase is limited."

The dollar-won exchange rate reached 1,375.4 won on the 12th, marking the highest level in 17 months. A rapid rise in the exchange rate increases the possibility of foreign investors withdrawing funds due to potential foreign exchange losses.

Kim Seok-hwan, a researcher at Mirae Asset Securities, pointed out, "Historically, the depreciation of the won has negatively affected foreign demand in the stock market, so it is necessary to pay close attention to exchange rate trends for the time being."

Kim also forecasted, "With heightened geopolitical tensions between Iran and Israel, demand for safe-haven assets is increasing. The one-month Non-Deliverable Forward (NDF) dollar-won exchange rate started 2 won higher at 1,379 won, and the KOSPI is expected to open down around 1%."

He added, "The exchange rate has risen to its highest level since early November 2022, and oil prices are also increasing. The combination of 'rising exchange rates + strong oil prices' could stimulate domestic import prices, potentially increasing uncertainty about the future path of domestic inflation."