South Korea markets sink as Kospi records worst day in decades amid Iran conflict

South Korea’s stock market suffered a major sell off Wednesday as the Kospi index plunged more than 12 percent, putting it on track for its worst trading day in decades.

According to a report by CNBC, the sharp decline comes amid rising geopolitical tensions linked to the conflict involving Iran.

The Korea Exchange temporarily halted trading in the Kospi, while a circuit breaker was triggered for the Kosdaq index, which also dropped around 13 percent.

Major South Korea technology companies led the losses. Samsung Electronics and SK Hynix fell about seven percent and five percent respectively.

“The decline in the KOSPI can broadly be attributable to the single-name concentration that we see in the Korean markets,” Lorraine Tan, Asia director of equity research at Morningstar, told CNBC.

According to Morningstar data, Samsung and SK Hynix together make up nearly half of the index.

Tan said the sell off reflects profit taking after a strong rally and concerns about the pace of AI data center expansion.

“We believe that the drop in share prices is partly driven by profit taking after a strong runup amidst a risk-off environment but also implies growing concern that the AI datacenter adoption pace might slow due to its significantly higher energy costs than regular data centers,” she said.

Analysts also say South Korea’s economy is highly sensitive to oil price swings, making it vulnerable during Middle East conflicts.