[R&E] Global Financial Markets Shaken by Middle East-Driven High Oil Prices and Inflation Fears: Will K-Semiconductors and Defense Prove Their Earnings Defense Mechanisms?

[R&E: Research & Epoch]

This is News Epoch's signature report, offering a perspective on the new era of investment through the integrated analysis of global financial data and research from domestic securities firms.

Global Market Brief

Last weekend, the New York stock market closed lower across the board, facing escalating geopolitical tensions and fears of reignited inflation. The S&P 500 (INDEXSP: .INX) index fell 108.31 points (-1.67%) from the previous day to 6,368.85, continuing its downward trend for the fifth consecutive week, while the tech-heavy Nasdaq (NASDAQ: .IXIC) saw a steeper drop to 20,948.36 (-2.15%). The Dow Jones (INDEXDJX: .DJI) index also dropped 793.47 points (-1.73%) to close at 45,166.64, with assessments suggesting it has entered a correction phase.

The key drivers of the decline were surging oil prices and shrinking consumer sentiment. As the Iran-Israel war risk persisted, the price of West Texas Intermediate (WTI) crude oil soared to $99.64 (+5.46%) per barrel, threatening the $100 mark. This resulted in pushing the US University of Michigan's 1-year inflation expectation for March up to 3.8%. On the other hand, the University of Michigan's Consumer Sentiment Index came in at 53.3, falling short of both market expectations and the previous month's figure, recording its lowest level since December 2025. This was the result of fears dominating the market that high inflation would erode purchasing power and delay the timing of interest rate cuts. The US 10-year Treasury yield rose to 4.428%, strengthening the risk-off sentiment.

Domestic Market Overview

On the previous trading day, the domestic stock market showed a mixed performance amid the uncertainties of the global external environment. The KOSPI fell 0.40% from the previous day to 5,438.87, while the KOSDAQ closed up 0.43% at 1,141.51. Amid continued selling by foreign and institutional investors, the KRW/USD exchange rate rose 3.4 won from the previous day to 1,511.2 won, threatening the psychological support line.

Today's market is expected to inevitably start lower, reflecting the plunge in the US stock market last weekend and the rise in the offshore exchange rate. The 1-month Non-Deliverable Forward (NDF) USD/KRW rate has risen to 1,513.50 won, increasing the pressure for a weaker won. However, the key will be whether the overwhelming earnings outlook of the semiconductor sector, led by Samsung Electronics (KRX: 005930), and the momentum of defense exports to the US can secure downward rigidity. The causal relationship has become clear, where global geopolitical risks induce oil price hikes, which in turn lead to increases in domestic import prices and limits to interest rate cuts.

Key Industry Issues and Insights

1. Semiconductors: The Reality of a 'Super Boom' Driven by Surging Average Selling Prices

The first-quarter earnings outlook for Samsung Electronics overwhelmingly outweighs the uncertainties of the external environment. The estimated operating profit for the first quarter is analyzed to increase by 504.6% year-on-year to 40.4 trillion won. The core reason is the steep rise in memory prices. The quarter-on-quarter growth rates of average selling prices for DRAM and NAND in the first quarter reached +50.0% and +60.0%, respectively. In particular, the prediction that commodity DRAM prices will rise an additional 58~63% in the second quarter suggests that the semiconductor industry has entered a super cycle beyond a simple recovery. This is evidence that price-setting power is overwhelming the burden of rising costs, and it proves that Korean semiconductor companies possess strong earnings defense mechanisms even amidst concerns of a global economic slowdown.

2. Shipbuilding and Defense: Structural Revaluation Through Entry into the US Supply Chain

Domestic shipbuilders are upgrading their business models by securing production bases in the US and combining AI defense solutions. HD Hyundai Heavy Industries (KRX: 329180) is strengthening strategic cooperation with US AI defense company Anduril for the joint development of unmanned surface vessels, and envisions dominating the manned-unmanned teaming system market, which is the core of future naval power, by completing the production of prototype ships by 2026. This is a stepping stone for bidding on the Modular Attack Surface Craft (MASC) project promoted by the US Navy, aiming at the related budget of $2.1 billion. By introducing prototypes optimized for the Korean and US markets around 2027, it is expected to prove its evolution into an AI-based high-value-added defense platform beyond simple shipbuilding. Hanwha (KRX: 000880) is also cooperating with Havoc AI to review the Hanwha Philly Shipyard as a production base within the US, pushing to supply autonomous unmanned vessels on the scale of hundreds of ships. The expansion from simple shipbuilding to AI-based unmanned systems implies that the Korean shipbuilding industry is evolving into a high-value-added defense platform.

3. Cosmetics and Health Functional Foods: Breaking Away from Dependence on China and the Success of Direct Exports to the US Market

Companies that have broken away from the traditional China-centric portfolio are showing distinct profitability improvements. Amorepacific (KRX: 090430) posted a first-quarter operating profit of 121 billion won, merely a 3% growth compared to the previous year, but internal indicators recorded meaningful changes. While sales of Sulwhasoo in China decreased by 20%, sales in domestic e-commerce and multi-brand shop channels recorded high growth of around 20%, reorganizing the profit and loss structure. In particular, exports of health functional foods to the US are expected to increase by 21% year-on-year based on 2025, and the recent export growth rate in January and February reached 80% compared to the previous year. The fact that Cosmax NBT (KRX: 222040) recorded a first-quarter operating profit of 4.1 billion won, surging 376% year-on-year, supports that K-beauty and health functional foods are settling as essential consumer goods within the US market.

4. Finance: Quantitative Visualization of Shareholder Returns

The financial sector's corporate value enhancement policies are being proven by specific dividend figures. The estimated first-quarter dividend per share for Shinhan Financial Group (KRX: 055550) is 740 won, analyzed to increase by 88% compared to the same period last year. KB Financial Group (KRX: 105560) is also expected to have a dividend per share of 1,090 won, up more than 20% year-on-year. This means that the massive interest income secured by bank stocks near the peak of interest rates has entered a virtuous cycle of treasury stock cancellation and dividend expansion. In a period where the index is stagnant due to external uncertainties, such high-dividend tendencies serve as a strong downward support line for investors.

Market Signals

• Energy Risk: WTI $99.64 (+5.46%), settling above $100 becoming visible if the Iranian war continues.

• Semiconductor Earnings Explosion: Samsung Electronics 1Q26 estimated operating profit 40.4 trillion won (+504.6% YoY).

• Exchange Rate Volatility: KRW/USD exchange rate 1,511.2 won. Continued pressure for additional offshore exchange rate hikes.

• Shipbuilding Order Momentum: US Navy's $2.1 billion budget allocated for unmanned surface vessels, domestic shipbuilders likely to benefit.

• Financial Value-up: Shinhan Financial Group 1Q estimated dividend per share 740 won (+88% YoY).

Epoch View: Investment Implications

The global financial market faces stagflation fears of high oil prices and inflation. However, the resilience of the Korean market suggested by the data is different from the past. The price surge of memory semiconductors has proven an earnings stamina that more than offsets the cost increases, and the shipbuilding industry has been elevated to a core partner in the US defense supply chain, offering a solution to its undervaluation phase. Ultimately, the power to overcome the waves of surging interest rates and exchange rate volatility depends on 'whether one has dominated the supply chains that the US needs.' Rather than waiting for uncertainties to be resolved, a strategy that pays attention to the strong price-setting power of individual sectors and changes in geopolitical positioning is effective.

This content was generated through News Epoch's proprietary AI algorithm, which analyzes public data from major domestic securities firm research centers and global financial media in real-time. It is an objective summary based on collected data and is not an investment solicitation or recommendation for any specific stock.