Korean Stocks and Won Surge on Relief from Iran Ceasefire

South Korean Assets Surge as Iran War Truce Raises Hopes of Easing Energy Disruptions

South Korean assets experienced a significant surge on Wednesday, following a last-minute temporary truce in the six-week old war in Iran. The benchmark Kospi rose 6.9%, leading gains in Asia and extending its advance for the fourth straight session. The South Korean won also rose as much as 2.1% against the dollar.

Chip heavyweights Samsung Electronics Co. and SK Hynix Inc. gained 7.1% and 13% respectively, as investors' focus shifted back to the artificial intelligence trade and corporate governance reforms. The truce, which includes a two-week ceasefire in exchange for Tehran reopening the Strait of Hormuz, has raised hopes of easing energy supply disruptions and lifting risk appetite.

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The sharp drop in oil prices has lifted sentiment for one of the region's most energy-dependent economies, putting investors' focus back on the artificial intelligence trade and corporate governance reforms. The Kospi is up nearly 40% so far this year, adding to last year's stellar gains. Retail investors were heavy net sellers on Wednesday, offloading a record 5.4 trillion won of Kospi stocks, while foreign investors and domestic institutions absorbed most of the supply.

Renewed foreign inflows have helped lift the won to its strongest level since March 11, while 10-year bond futures have climbed to their highest since March 19. The energy shock, which has pushed South Korea's government to take increasingly aggressive steps, including a fuel price cap, to shield the economy, is beginning to ease in a significant way.

This moment appears to mark a pivot point where the market transitions from a war-risk-driven discount phase toward a normalization phase, according to Ha SeokKeun, chief investment officer at Eugene Asset Management Co. The underlying drivers of higher energy prices are unlikely to shift significantly anytime soon, as lost capacity cannot be restored quickly, warned Francis Tan, Asia chief strategist at Indosuez Wealth in Singapore. "So, buyers beware," he cautioned.

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