South Korea's Stock Market Crashes 12% Amid Iran-US Tensions and Risky Bets
South Korea's stock market today suffered its worst crash in nearly two decades on Wednesday, March 4, 2026. The Kospi index plunged by 12.1%, the steepest single-day drop since 2008, as rising tensions between Iran and the US sent shockwaves through global markets. Investors rushed to pull funds from banks, pushing personal borrowing to record levels in just days.
The sharp decline followed escalating military tensions between Iran and the US, which triggered fears over energy security. South Korea, heavily reliant on Middle Eastern crude oil, saw major tech stocks tumble—Samsung Electronics fell by 11.7%, while SK Hynix dropped 9.6%. The KOSDAQ index also lost around 14%, deepening market panic.
As stock prices collapsed, investors shifted money out of bank deposits. Time deposits and demand deposits shrank significantly, with funds redirected into the stock market in a bid to capitalise on potential rebounds. Meanwhile, personal overdraft accounts surged by about 1.3 trillion won ($875 million) in March alone.
The balance of these overdrafts hit 40.72 trillion won by early March, the highest since December 2022. This rapid increase—rising from 39.42 trillion won on February 27—occurred over just three business days. Financial experts have since warned against excessive risk-taking, noting that over half of South Korea's household loans carry variable interest rates, leaving borrowers vulnerable to sudden rate hikes.
The market crash has exposed the risks of leveraged investing, with household debt climbing sharply in a short period. With energy prices volatile and geopolitical tensions unresolved, analysts expect continued pressure on South Korea's financial stability. Investors now face higher borrowing costs and greater uncertainty in the months ahead.
