South Korea leads Asia market rout as oil spikes, circuit breaker triggers as Kospi plunges 8%

TOKYO – Asia stocks sank as oil prices surged on March 9 amid an escalating conflict in the Middle East and after US employment data stoked concerns about growth.

South Korea led the rout as the Kospi triggered its second circuit breaker in four sessions. The index plunged more than 8 per cent, triggering a 20-minute suspension in trading from 10.31am local time. Heavyweight Samsung Electronics plunged more than 10 per cent, while chip counterpart SK Hynix shed 11.6 per cent.

A circuit breaker was activated last week when the benchmark tumbled more than 12 per cent on March 4 to record its worst single-day decline.

Other Asian markets dived: Japan’s Nikkei index fell 6.75 per cent, Taiwan's TAIEX index lost 5.61 per cent, Hong Kong’s Hang Seng Index dropped 3.11 per cent, while Singapore’s Straits Times Index was down 2.89 per cent.

The Iran war has impacted Asian stocks disproportionately, partly because of the region’s outsized reliance on fuel shipments through the Strait of Hormuz. South Korean stocks continue to bear the brunt of the sell-off, as investors take profits from the artificial intelligence boom that drove big gains in tech shares.

In pre-market trading in New York, futures tied to the Dow Industrial Average slid 1.79 per cent, S&P 500 futures lost 1.7 per cent and Nasdaq 100 futures dropped 1.9 per cent.

Oil prices soared about 20 per cent in early trade on March 9, smashing through the psychological US$100 barrier, as the expanding US-Israeli war with Iran fuelled fears of tighter supply and prolonged disruptions to shipments through the Strait of Hormuz.

The Middle East conflict is now more than a week old, with concerns building about a prolonged war. Iran picked a new supreme leader and has maintained attacks on several nearby countries following US-Israeli strikes. Arab states across the Persian Gulf continue to face incoming missiles and drones from Iran, which said it had the capacity to sustain the war for months. 

“The reported next leader of Iran is someone US President Donald Trump finds unacceptable, and there is no clear path towards a resolution in sight,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Laboratory. “Japanese equities had been outperforming US stocks since the start of the year, which makes them more vulnerable to declines given how much they had already risen.” 

Sentiment was further soured by the government payrolls report from the US on March 6, which showed that employers unexpectedly cut jobs in February and the unemployment rate rose. 

“The immediate reaction I believe is ‘risk off’, rather than going short,” said Neil Newman, head of strategy at Astris Advisory Japan. “The volatility and direction of Asian equities is too difficult to read right now.” BLOOMBERG