South Korean equities suffered their steepest sell-off since 2024 as escalating war risks in the Middle East rattled global investors and triggered heavy foreign outflows across the region.

The benchmark KOSPI plunged as much as 7.8% to the 5,790 level on Tuesday, registering its worst session since August 2024, as trading resumed after a holiday. The sharp decline came amid mounting concerns that a prolonged conflict between Iran, the U.S., and Israel could disrupt global energy supplies and derail risk appetite.

Chip heavyweights Samsung Electronics and SK Hynix were among the biggest drags, tumbling 10% and 11.5%, respectively. The two companies, which have powered much of the market’s rally this year on the back of surging demand for AI-driven memory chips, saw a combined $170 billion wiped off their market capitalisation in a single session.

Global funds reportedly offloaded more than $3 billion worth of Korean equities, amplifying the rout. The sell-off poses a major test for one of the world’s best-performing markets in 2026, with the Kospi still up over 35% year-to-date despite Tuesday’s plunge. The Korean market has delivered a whopping return of 129% in the past one year and nearly 82% in the last six months.

MSCI Asia Pacific Index down 2%

Geopolitical jitters weighed on other Asian markets too as the U.S. and Israel’s military strikes on Iran entered their fourth day, triggering a broad sell-off in risk assets and spiking crude oil prices amid fears of a widening conflict.

The MSCI Asia Pacific Index fell as much as 2%, heading for its worst two-day stretch in nearly a year after U.S. and Israeli strikes on Iran heightened fears of further escalation.

Japan’s Nikkei 225 dropped over 3%, weighed down by exporter and technology stocks. Hong Kong’s Hang Seng Index declined 1.23%, while mainland China’s Shanghai Composite Index slipped as much as 1.45%.

Taiwan’s Taiwan Weighted Index lost 2.25%, reflecting pressure on semiconductor names, though the index remains up about 17% this year. Indonesia’s Jakarta Composite Index fell 0.56%, while Singapore’s Straits Times Index managed modest gains of 0.40%, bucking the regional trend.

Oil shock adds to pressure

The sell-off was largely driven by surging crude prices after coordinated U.S.–Israel strikes on Iran heightened fears of supply disruptions in the Middle East. Brent crude prices surged past $79 per barrel after jumping more than 7% on Monday, fuelling fears of renewed inflation and tighter financial conditions.

Investor anxiety intensified after Iran reportedly escalated retaliatory strikes and threatened to close the Strait of Hormuz, a key artery for global oil flows.

Ajit Mishra of Religare Broking said rising crude prices, triggered by U.S. and Israeli strikes on Iran and the risk of supply disruptions through the Strait of Hormuz, have raised concerns over inflation, currency pressure, and India’s import bill.

“Investor sentiment deteriorated sharply after escalating tensions in the Middle East triggered a surge in crude oil prices and heightened global uncertainty. The spike in oil raised concerns about inflation, currency pressure, and India’s import bill, which weighed on equities,” he said.

Meanwhile, the Indian equity market also ended sharply lower on Monday, while markets remained closed today on the eve of Holi. The NSE Nifty declined 1.24% to close at 24,865.70 after slipping more than 2% intraday, while the BSE Sensex dropped 1,048 points to settle at 80,238.85.

The total market capitalisation of BSE-listed firms eroded by ₹6.60 lakh crore in a single session, falling to ₹456.91 lakh crore.

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