As Foreigners Sell Off 1.8 Trillion Won, "I'll Buy the Dip"... Donghak Ants Prevent KOSPI Plunge [U.S.-Iran War]

KOSPI briefly falls below the 6,100 mark in early trading on March 3

Heavy foreign selling, individuals and institutions defend the market

War and surging oil prices... Short-term correction in stock market seen as inevitable

Amid the fallout from the Middle East crisis, the domestic stock market started lower on the 3rd. An employee is monitoring the stock market and exchange rates in the dealing room at the Seoul Hana Bank headquarters. On this day, the KOSPI opened at 6,165.15, down 78.98 points (1.26%) from the previous close, and the KOSDAQ dropped 22.96 points (1.92%) to 1,169.82. The won/dollar exchange rate started the session 22.6 won higher at 1,462.3. March 3, 2026 Photo by Jo Yongjun

The global financial markets are experiencing turbulence following a U.S. airstrike on Iran, leading to a correction in the Korean stock market as well. While foreign investors continue to sell off shares in large volumes, retail investors-often referred to as 'Donghak Ants'-have been net buyers for consecutive days, stepping in to support the index.

Experts believe that, given concerns over a prolonged war and a surge in international oil prices due to the closure of the Strait of Hormuz, volatility in the Korean stock market is likely to increase in the near term. However, some also note that, considering strong retail buying, the government's commitment to revitalizing the market, and expectations for improved corporate earnings-especially in semiconductors-the market correction could be short-lived.

KOSPI Falls on U.S.-Iran Conflict

On March 3, the KOSPI opened at 6,165.15, down 1.26% from the previous session. The KOSDAQ also started the day down 1.92% at 1,169.82. In early trading, the index briefly dipped below the 6,100 level to 6,081.92 before rebounding. As of 9:46 a.m., the KOSPI was trading at 6,171.90, down 1.16%, while the KOSDAQ was at 1,185.37, down 0.62%, attempting to recover some of its losses.

After the United States and Israel attacked Iran over the weekend, the Korean stock market also started the day under negative influences. On February 28, the United States and Israel carried out airstrikes and eliminated Iran's Supreme Leader Ayatollah Ali Khamenei. Following this, both countries exchanged attacks using missiles, drones, and other weapons, escalating the conflict.

The outbreak of war caused a steep rise in international oil prices. Overnight on the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil futures for April delivery closed at $71.23 per barrel, up 6.3% from the previous session. Brent crude futures at one point soared 13% to $82.37 per barrel during the session, marking the highest level in over a year since January of last year. The New York stock market, however, closed relatively flat, avoiding a major decline.

Due to the war, shares related to defense, shipping, and refining saw sharp gains in the Korean stock market. As of 9:40 a.m., Hanwha Aerospace, the leading defense stock, was trading at 1,482,000 won, up 24.02% from the previous session. LIG Nex1 was hitting its upper price limit, while other defense stocks such as Hanwha Systems (up 29.05%) and Hyundai Rotem (up 18.44%) also surged.

Shipping stocks also rose significantly. As of 9:42 a.m., Heung-A Shipping was up 29.73% from the previous session, reaching its upper price limit. At the same time, STX GreenLogis (up 27.03%), Korea Line (up 25.12%), and HMM (up 15.46%) posted double-digit gains. In addition, energy-related stocks such as oil refiners and gas companies also saw substantial increases.

In contrast, Samsung Electronics and SK hynix shares trended downward. As of 9:45 a.m., Samsung Electronics was trading at 211,500 won, down 2.31% from the previous session, while SK hynix dropped 2.45% to 1,036,000 won.

Foreign investors continued to sell shares, while individual investors stepped in to support the indices. As of 9:50 a.m., the net selling by foreigners on the KOSPI alone reached 1.8 trillion won. Meanwhile, individuals net bought 1.25 trillion won, helping to hold up the index.

Recently, persistent foreign selling has been met by domestic individual investors-often called 'Donghak Ants'-who continue to support the index. According to the Korea Exchange, on February 27, foreign investors recorded their largest-ever single-day net selling on the KOSPI at 7.03 trillion won, while individual investors net bought 7.543 trillion won, supporting the index. Foreign investors have continued net selling for eight consecutive trading days up to this point.

The increased buying by individual investors is also evident in the exchange-traded fund (ETF) market, where retail participation is high. As of February 27, total net assets of domestic ETFs reached 387.642 trillion won, a rise of 89.3959 trillion won from 298.2461 trillion won at the start of the year. ETF trading volume also surged, from 9.4131 trillion won at the beginning of the year to 28.1765 trillion won as of February 27.

Analysts interpret the robust buying by individual investors as a reflection of expectations for structural improvements in the Korean stock market, driven by pro-capital market policies under the Lee Jaemyung administration-such as amendments to commercial law-and improved earnings at semiconductor companies. Noh Donggil, a researcher at Shinhan Investment & Securities, said, "Weekly net buying of ETFs by individuals has remained positive for 20 consecutive weeks from mid-September 2025 to February 20, 2026. In particular, the buying momentum sharply intensified during January and February of this year."

Short-Term Market Correction Seen as Unavoidable Due to War and Oil Price Surge

Experts believe that the Korean stock market is highly likely to undergo a correction in the near term due to the impact of the U.S.-Iran war. In particular, if the Strait of Hormuz-an essential global oil shipping route-were to be closed, the stock market would inevitably take a hit.

The Strait of Hormuz, a narrow maritime passage connecting the Persian Gulf and the Gulf of Oman, is a key strategic location in the Middle East and a critical route for global oil shipments. Twenty-seven percent of the world’s seaborne oil trade passes through this strait. Of the strait’s total width of 55 kilometers, the shipping channel for oil tankers is less than 10 kilometers wide and lies entirely within Iranian territorial waters.

South Korea imports 70.7% of its crude oil and 20.4% of its liquefied natural gas (LNG) from the Middle East, so a blockade of the strait would sharply increase energy supply concerns. The Korea International Trade Association expressed concern, stating, "If Iran blocks the Strait of Hormuz, the world’s main oil shipping route, there is no clear alternative for our export and import logistics."

Seo Sangyoung, a researcher at Mirae Asset Securities, said, "If the Strait of Hormuz is completely blocked, there is a risk that oil prices could rise by 10 to 15 dollars in the short term. A surge in energy prices would serve as a downward pressure on the real gross domestic product (GDP) of major oil-importing countries, including South Korea, by about 0.3 to 0.4 percentage points." Seo added, "As risk-aversion sentiment spreads, the stock market is likely to weaken in the short term. Short-term volatility is inevitable, and if the rise in international oil prices persists, downward volatility will increase further."

However, there is also attention being paid to the possibility that the correction period may not be prolonged, thanks to strong retail buying and expectations for improved corporate earnings. Han Jiyeong, a researcher at Kiwoom Securities, explained, "Looking at previous cases of Middle East wars, the stock market typically declined immediately after the outbreak of war but quickly recovered previous losses. Unless the situation escalates to the level of the Suez Crisis during the Second Middle East War, the shock to stock prices caused by the war tends to diminish over time."

Lee Kyungmin, a researcher at Daishin Securities, also noted, "For now, we expect the situation to stabilize within a short period (within one month), and after a period of increased volatility, there is a high possibility that the upward trend will resume. From mid-March, market momentum from policy and earnings should strengthen, resulting in a more robust market."

Government Bond Market Expected to Weaken Due to War Impact

Meanwhile, the government bond market is also expected to be affected by the war. As concerns grow over inflation sparked by rising international oil prices due to the potential closure of the Strait of Hormuz, the government bond market is forecast to weaken in the short term. Given that about 72% of Korea’s oil imports and 35% of its natural gas imports come from the Middle East, experts warn that the shock to Korea’s government bond market could be greater than in the United States. Overnight, the benchmark 10-year U.S. Treasury yield, a global standard, jumped by more than 9 basis points (1bp = 0.01 percentage point). Bond yields move inversely to prices.

Kim Seongsu, a researcher at Hanwha Investment & Securities, projected, "With inflation concerns mounting, the yield on the 10-year government bond could rise to as much as 3.65%." Before the U.S. airstrike on Iran, on February 27, the yield was around 3.44%. However, he noted the Bank of Korea’s demonstrated commitment to stabilizing the bond market during its February Monetary Policy Board meeting, adding, "The war-related increase in yields is likely to be temporary." He projected a trading range for the 10-year government bond yield of 3.40-3.65% during the war period.

Yoon Yeosam, a researcher at Meritz Securities, commented, "The bond market’s sensitivity to war is more about energy (oil price) sensitivity in the war region than safe-haven preferences. If the current situation drags on for more than a month and oil prices exceed $100, this will add to the pressure and heighten tensions in the bond market."

This content was produced with the assistance of AI translation services.