KOSPI Plunges Nearly 7% Below 7,000 as US-Iran Conflict Escalates, SK Hynix Stock Slides Sharply

South Korea's benchmark KOSPI index plunged 6.99%, or 522.45 points, to 6,953.49 in early afternoon trading Monday, tumbling below the 7,000 mark for the first time since early May as renewed military escalation between the United States and Iran and a sharp pullback in chip stocks rattled investors across Asia.

The decline came after a fresh round of hostilities over the weekend threatened the already fragile ceasefire between Washington and Tehran. US Central Command said it had launched a new wave of airstrikes against Iran on Sunday after renewed fighting around the Strait of Hormuz saw several US Gulf allies targeted by incoming fire. Iran's Revolutionary Guards responded by declaring the strait, one of the world's most critical oil shipping corridors, would remain "closed until further notice and until the end of American interventions in this region," according to state news agency IRNA, a claim CENTCOM disputed on X, insisting the waterway remained "open to all vessels seeking to lawfully transit."

The renewed conflict sent oil prices sharply higher, with both major crude benchmarks jumping as much as 4.5% Monday, fueling fresh concerns that already elevated war-driven inflation could force central banks to raise interest rates further. Fawad Razaqzada, a market analyst at Forex.com, warned that the situation remained highly unpredictable. "One can easily imagine the situation spiralling quite rapidly," Razaqzada said. "Of course, rhetoric can soften. We've seen that movie before. But for now, traders are forced to assume the worst." IG analyst Fabien Yip noted that markets had priced in an overly optimistic outlook for the ceasefire just weeks earlier. "Oil's return towards pre-war levels in June reflected markets pricing in a best-case outcome for the fragile US-Iran arrangement," Yip wrote, adding that the "re-escalation exposes how fragile that assumption was."

Monday's selloff was led by South Korea's dominant chipmakers. SK Hynix shares dropped roughly 10%, extending a punishing recent stretch that has now erased about a third of the company's value since it hit a record high last month. The decline came despite SK Hynix's blockbuster $26.5 billion Nasdaq debut just days earlier, when the company's newly listed American depositary shares jumped nearly 13% in their first day of US trading. Rival Samsung Electronics fell more than 6% Monday, dragging the broader index lower given that the two chipmaking giants together account for roughly half of the KOSPI's total market weight.

Monday's plunge extends a brutal stretch for South Korean equities that began the previous Tuesday, July 7, when the KOSPI closed down 7.54% at 7,444.20 after an intraday decline exceeding 8%, triggering both a sell-side sidecar and a Level 1 circuit breaker in succession. That initial rout was driven by a combination of a semiconductor stock selloff on Wall Street, led by sharp declines in Intel and Micron Technology shares, and the first flare-up in Strait of Hormuz tensions. Foreign investors have now been net sellers of Korean equities for 13 consecutive trading sessions, a persistent outflow that has compounded the market's volatility.

Yuanta Securities global strategist Daniel Yoo described the broader confusion gripping investors trying to make sense of the chip sector's valuation following SK Hynix's unusual Nasdaq listing. "Everybody's really confused about what's going to happen to the memory demand and where the fair price is," Yoo said on CNBC's "Squawk Box Asia," noting that the dual listing has effectively created a new benchmark investors are still working to reconcile with the company's existing Korean shares.

Not every analyst has turned uniformly bearish on the underlying demand story driving the memory chip sector's extraordinary rally over the past year. Speaking to CNBC, one analyst who covers SK Hynix said the next wave of artificial intelligence applications, including agentic AI, robotics and other real-time systems, should continue to support demand for the company's high-bandwidth memory chips even amid near-term volatility, describing current demand for that memory as "extremely robust." The analyst cautioned, however, that the biggest long-term risk facing the sector remains a potential slowdown in AI infrastructure spending by major cloud computing providers.

Monday's declines were not confined to South Korea. Japan's Nikkei 225 fell 1.57%, while the broader Topix index declined 0.52%. The small-cap Kosdaq index, a secondary Korean exchange more heavily weighted toward growth and technology names, dropped nearly 2%. Australia's S&P/ASX 200 slipped 0.35%, while mainland China's CSI 300 fell 0.64%, though Hong Kong's Hang Seng Index bucked the regional trend, edging 0.91% higher.

Elsewhere in the Korean market, not every stock moved lower. Shares of LG Electronics rose more than 5% following a report from Seoul Economic Daily that the company would build AI server racks for Nvidia, part of an expanding collaboration between the two companies that Nvidia has said will support LG's broader push into robotics and autonomous driving technology.

Kiwoom Securities analyst Han Ji-young, addressing the market's likely trajectory in comments made during a prior bout of volatility earlier this month, said heightened swings should be expected for as long as external pressures from both Wall Street and the Middle East persist. "South Korea's stock market today is expected to see elevated volatility from the opening bell due to external headwinds including U.S. stock market weakness and Strait of Hormuz uncertainty," Han said at the time, though she also noted that prior sharp declines have sometimes been followed by intraday rebounds as bargain-hunting demand emerges.

Monday's drop leaves the KOSPI down sharply from the record highs it touched earlier this year, when the index had been riding an extraordinary rally driven largely by South Korea's dominant position in the global memory chip supply chain feeding the artificial intelligence boom. With the ceasefire between the United States and Iran now appearing increasingly fragile and investors still working through how to value SK Hynix's newly dual-listed shares, analysts said further volatility across Korean markets is likely in the sessions ahead, with traders closely watching both developments in the Gulf and any signals on Federal Reserve policy for clues on where the market heads next.