South Korean equities plunged 12% on Wednesday, marking the worst single-day drop in history, as global markets reeled from escalating tensions in the Middle East. The Kospi benchmark, which had surged nearly 50% earlier this year, fell nearly 20% since Friday, erasing months of gains. Investors feared prolonged conflict in Iran could disrupt oil supplies, worsening inflation and economic growth for Asia’s eighth-largest oil importer.

Samsung Electronics and SK Hynix, the world’s top memory chipmakers, led the sell-off, each dropping over 20% since the war began. Their combined 40% weighting in the Kospi amplified losses. Foreign investors sold $3.4bn in Kospi shares this week, pushing the won to a 16-year low against the dollar. Retail investors, who fueled the market’s rally, now face panic as leveraged bets unravel.

The Bank of Korea warned it would intervene if market volatility persists, while analysts warned of further pressure on the currency. Seoul’s $350bn US investment pledge to secure trade benefits added uncertainty. Japan’s Topix and Taiwan’s Taiex also fell, though less severely, highlighting regional anxiety over geopolitical risks.

Retail investor Song Mi-kyung described the crash as unprecedented: "I’ve never seen a freefall like this." With oil prices climbing 2.5% to $83.40 a barrel, concerns mount that prolonged Middle East turmoil could cripple South Korea’s export-driven economy.