Kospi craters nearly 5% after Trump warns of hitting Iran hard

The Kospi fell 244.65 points, or 4.47 percent, to close at 5,234.05, giving up more than half of the previous session’s gains after U.S. President Donald Trump’s national address on the Iran war dashed hopes for an immediate ceasefire.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 5,234.05 points on April 2, down 244.65 points, or 4.47 percent, from the previous trading session. [NEWS1]

Korea’s markets and currency tumbled on Thursday after U.S. President Donald Trump’s national address on the Iran war dashed hopes for an immediate ceasefire.

The benchmark Kospi fell 244.65 points, or 4.47 percent, to close at 5,234.05, giving up more than half of the previous session’s gains after it surged 8.44 percent on optimism for a quick end to the conflict. The secondary Kosdaq also slid 5.36 percent to 1,056.34.

Institutional investors sold a net 1.45 trillion won ($1.07 billion), while foreign investors offloaded 140.6 billion won. Retail investors bought a net 1.21 trillion won, helping limit losses.

Large-cap stocks led the decline. Market bellwether Samsung Electronics dropped 5.91 percent and rival chipmaker SK hynix fell 7.05 percent.

Investors reversed course after Trump said in a prime-time address on Wednesday that the United States would strike Iran “extremely hard over the next two to three weeks."

“The message itself hasn’t changed much, but market expectations have,” said Kang Jin-hyuk, a researcher at Shinhan Securities. “Investors had already priced in an end to the war, and when that didn’t happen, they started selling.”

A broadcast of President Lee Jae Myung’s address at the National Assembly on a supplementary budget related to the conflict in the Middle East is shown on a dealing room board at Woori Bank’s headquarters in Jung District, central Seoul, on April 2. [YONHAP]

Market volatility has intensified as investors react to developments in the United States and Israel's war against Iran. Trading curbs, known locally as sidecars, that temporarily halt program selling were triggered in both the Kospi and Kosdaq markets during Thursday’s session.

So far this year, authorities have activated 14 market stabilization measures in the Kospi, including 12 sidecars and two circuit breakers. The Kosdaq has recorded eight such measures, both the highest levels since 2008 during the global financial crisis.

The Kospi Volatility Index, often referred to as Korea’s “fear index,” averaged 60.77 over the past week, well above the level of 50 that signals extreme market anxiety.

The dollar-won exchange rate is displayed on a board at Hana Bank's trading room in central Seoul on April 2. [NEWS1]

The local currency weakened sharply on Thursday, falling 18.4 won to close at 1,519.7 to the dollar. The dollar-won rate moved higher after Trump’s remarks, reflecting increased demand for the dollar as a safe-haven asset.

Other Asian markets also declined. Japan’s Nikkei fell 2.38 percent, Taiwan’s Taiex dropped 1.82 percent, Hong Kong’s Hang Seng slipped 0.78 percent and China’s Shanghai Composite edged down 0.74 percent.

Oil prices climbed sharply after Trump’s comments, reversing earlier declines and reflecting renewed concerns over supply disruptions tied to the conflict.

Bitcoin also fell, trading at $66,640 as of 4 p.m., down 3.56 percent from 24 hours earlier, as investors treated it more like a risk asset than a safe haven.

Gold prices declined as well. Futures on the New York Mercantile Exchange fell 3.75 percent to $4,632 per troy ounce, as rising oil prices fueled inflation concerns and reduced expectations for interest rate cuts, weakening demand for nonyielding assets.

Gas and diesel prices are displayed at a gas station in Seoul on April 2. [YONHAP]

Analysts remain divided on the outlook for the Iran war and markets.

“There are concerns about escalation in the short term, but Trump’s remarks can also be seen as a strategic approach to bring Iran to the negotiating table,” said Kim Seok-hwan, a researcher at Mirae Asset Securities.

Alicia Garcia Herrero, chief economist for Asia-Pacific at finance firm Natixis, said in an interview with CNBC that Trump’s statements lack credibility given continued military activity.

“Markets reacted negatively because, while Trump says it is nearly over, he is sending the third aircraft carrier and more troops to the region, so it is hard to believe his words," she said.

"The only thing that really matters is whether the Strait of Hormuz will open soon. Trump's speech doesn't imply this is likely to happen," Prashant Newnaha, a senior rates strategist at TD Securities, told Bloomberg.

"His comments on the duration of other wars were notable, in that even if the war with Iran lasts a few months, it's not as long as prior wars," he added.

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 PARK YU-MI [kim.juyeon2@joongang.co.kr]