[R&E] Financial Markets Swallowed by Fear of Hormuz Blockade... Defense and Energy Sectors Dominate Amid KOSPI's Retreat to the 5,700 Level

[R&E: Research & Epoch]

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Market Overview: Key Indicators and Trends

The New York stock market closed lower the previous day as geopolitical risks in the Middle East escalated into a full-scale war scenario. The commencement of the U.S. 'Operation Epic Fury' and the presumed death of Iranian Supreme Leader Khamenei drove the market's risk aversion to an extreme. Consequently, the S&P500 (-0.94%) and the Nasdaq (-1.02%) both weakened across the board, and the 10-year U.S. Treasury yield soared to 4.05%, reflecting the possibility of reigniting inflation due to concerns over the blockade of the Strait of Hormuz.

These external shocks were fully reflected in the domestic stock market during the previous trading session. The KOSPI broke below the 6,000 level, recording 5,791.91 with a 7.24% plunge from the previous day, and a sell sidecar was triggered as foreigners poured out an unprecedented 5 trillion won in dumping. The KRW/USD exchange rate also skyrocketed to 1,485.3 won, reflecting geopolitical uncertainties and amplifying volatility in the financial markets. Although the opening of China's Two Sessions and the announcement of South Korea's industrial activity trends are scheduled for today's market, conservative trends are expected to continue unless the risks of logistics and energy disruptions originating from the Middle East are resolved.

Key Sector Issues and Insights

In the face of the geopolitical crisis, the contrast between sectors is sharply divided. The most sensitive responses came from the defense and energy sectors. Driven by expectations of increased demand for precision strike systems due to the spreading Middle East risks, Hanwha Systems surged by 29.1% on the previous trading day, approaching the upper limit. The forecast of surging oil prices and improved refining margins strongly drove up the stock price of S-Oil (+28.5%), showing off its aspect as a hedge sector defending against market declines. The shipping industry is also monopolizing the risk premium, with Frontline (NYSE: FRO), which is certain to benefit from rising freight rates due to the Hormuz blockade, recording a 242% surge in fourth-quarter net profit.

On the other hand, the semiconductor industry is blocked by macroeconomic uncertainties despite its phenomenal export fundamentals. February memory semiconductor exports recorded $15.81 billion, showing a record growth rate of 234.6% year-on-year, and the unit price of NAND flash in particular surged by 496.5%, proving improved profitability. Samsung Electronics is strengthening its profit fundamentals, with its 2026 operating profit forecast revised upward to 200 trillion won, but its stock price is failing to reflect its intrinsic value due to supply and demand outflows caused by macroeconomic risks. The fact that ISU Petasys, which is highly likely to see demand for high-layer count printed circuit boards following AI infrastructure expansion, is focusing on fundamental improvement by expanding its multi-layer revenue portion to 31% is an indicator foretelling a strong rebound when the market stabilizes in the future.

Market Signals

• Overwhelming Expansion in Semiconductor Exports: February memory semiconductor exports recorded $15.81 billion, surging 234.6% compared to the same period last year. In particular, the unit prices of DRAM and NAND flash rose by 259.5% and 496.5% respectively, confirming that the strong upward phase of the industry is continuing.

• Increased Volatility in Exchange Rates and Supply/Demand: The KRW/USD exchange rate soared to 1,485.3 won, inducing a net sell-off of 5 trillion won by foreigners. This is interpreted as a temporary liquidity crunch caused by geopolitical fears rather than actual damage to corporate value.

• Highlighting the Strategic Value of Defense and Energy Sectors: As the clouds of war thicken in the Middle East, security-related stocks such as Hanwha Systems (+29.1%) and S-Oil (+28.5%) emerged as powerful leading stocks that offset the downward pressure on the index.

Epoch View: Investment Implications

The driver currently dominating the market is not corporate performance but the external geopolitical crisis itself. Although the KOSPI index plummeted by over 7.2% and fear has reached its peak, attention should be paid to the fact that domestic export data, led by semiconductors, is more solid than ever. At this point, rather than joining the fear caused by the index decline, a strategy of using the defense and energy sectors, which are capable of risk defense, as a bulwark for the portfolio is effective.

At the same time, a selective approach is essential for high-growth tech stocks that have recorded excessive declines. Stocks with secured earnings visibility, such as Samsung Electronics and ISU Petasys, are expected to show the fastest recovery resilience when external variables subside. Supply chain disruptions and rising logistics costs caused by Middle East risks will act as short-term cost pressures, but this is highly likely to transition into logic that justifies product price hikes and the valuation expansion of the industry as a result. This is a time that requires the insight to track the intrinsic growth of earnings per share hidden behind the crisis with a cool-headed perspective.

This content was generated through News Epoch's proprietary AI algorithm, which tracks and analyzes public data from research centers of major domestic securities firms in real-time.
Please note that this is an objective summary based on collected data, and it is not an investment solicitation or recommendation for any specific stock.