Korean won sinks to 17-year low on Middle East conflict

The Korean won slid to its weakest level in 17 years on Monday, breaching 1,510 per US dollar, as the effects of the war in the Middle East rippled across global markets.

The won closed at 1,517.3 per dollar, 16.7 won weaker than the previous session, for a third straight close above the 1,500 mark. It was the currency’s weakest daytime close since March 9, 2009, when it ended at 1,549 in the wake of the global financial crisis.

After opening at 1,504.9 per dollar, down 4.3 won from Friday’s close, the won extended losses through the session and approached the 1,520 level by the end of onshore trading.

Investors braced for prolonged market strain from surging oil prices and rising geopolitical risks as tensions between the US and Iran deepened. The latest flare-up followed Trump’s warning Saturday that gave Iran 48 hours to reopen the Strait of Hormuz or face attacks on its power infrastructure, with Tehran responding by threatening retaliation.

The dollar index, which measures the US currency against six major peers, rose 0.29 percent from the previous session to 99.695.

Pressure on the won also fueled a broad sell-off in local equities. The benchmark Kospi fell 6.5 percent to close at 5,405, ending below the 5,500 level for the first time in six sessions.

As the sell-off intensified at the open, a sell-side sidecar was triggered at 9:18 a.m., halting program trading for five minutes after Kospi 200 futures dropped more than 5 percent for over one minute.

Foreign and institutional investors together offloaded about 7.5 trillion won ($5 billion) worth of Kospi shares. Institutions led the selling with net sales of 3.82 trillion won, while foreigners sold a net 3.67 trillion won.

Retail investors stepped in to absorb some of the losses, net buying 7 trillion won worth of shares.

The secondary Kosdaq also slid more than 5.5 percent to close at 1,096.89, with foreign investors and institutions each selling more than 200 billion won, while retail investors remained net buyers.

Park Sang-hyun, an analyst at IM Securities, said won volatility is likely to persist as the Middle East conflict shifts beyond a conventional geopolitical flash point into what he called a “global energy war.”

“If the Iran risk is not resolved by April, it will not only push oil prices higher, but also increase the risk that elevated prices become entrenched,” Park said. He added that it could sharpen recession risks in non-US economies such as Asia and Europe and intensify pressure on major asset prices.

Park saw the won as likely to stay in the 1,500s against the greenback if high oil prices persist, though intervention concerns may limit further near-term losses beyond current levels.