South Korea's KOSPI benchmark index tumbled 12% on March 4, its steepest single-day drop since the 2008 financial crisis. The sell-off was triggered by massive foreign investor liquidation and unwinding of leveraged positions, according to Bank of America. Since the Mideast conflict escalated, the index has fallen about 15%, making it the worst-performing major equity market globally.

Bank of America strategist Chun Him Cheung attributed the collapse to excessive leverage in Korean tech stocks ahead of February 28, when bullish sentiment ran high on AI-driven memory chip demand. Foreign investors have been aggressive sellers since late February, accelerating the market's decline through margin selling. The turmoil spread to currency markets, with the Korean won weakening sharply from around 1,430 to above 1,500 before suspected central bank intervention.

Cheung warned that currency volatility could persist amid unresolved geopolitical tensions. He expects USD/KRW to remain capped below 1,480 unless broader risk-off sentiment drives a dollar rally that could push the pair back toward 1,500. While Korea's trade position remains strong with February exports up 29% year-over-year driven by semiconductor demand, Cheung cautioned that the Mideast conflict could erode this advantage through higher oil prices.