A sharp sell-off in South Korea’s stock market triggered by escalating geopolitical tensions has sent the KOSPI index plunging 4.3% in early trading, with defense and energy stocks bearing heavy losses. Global markets brace for spillover effects.
- KOSPI dropped 4.3% to 2,498.71 on March 4, 2026
- LMT shares fell 6.8% on defense sector concerns
- RTX declined 5.2% amid contract uncertainty
- CL=F crude oil rose 3.4% to $89.10 per barrel
- Korean won weakened 1.9% against the U.S. dollar
- KRXV volatility index reached 28.6, highest since 2023
South Korea’s financial markets plunged in early trading on March 4, 2026, as rising regional tensions sparked a 'Seoul-sapping selloff' that erased billions in market value. The KOSPI index dropped 4.3% to close at 2,498.71, marking its steepest one-day decline in over 18 months. The sell-off was driven by heightened fears of military escalation on the Korean Peninsula, prompting investors to exit risk-sensitive assets across the board. Defense and energy sectors were hardest hit. Shares of LMT (Lockheed Martin) fell 6.8% amid concerns over supply chain disruptions and shifting defense procurement priorities in the region. RTX (Raytheon Technologies) declined 5.2%, reflecting investor anxiety over potential delays in missile defense contracts and increased geopolitical uncertainty. Meanwhile, crude oil futures (CL=F) surged 3.4% to $89.10 per barrel, as markets priced in potential supply disruptions from the region, particularly from key shipping lanes near the Korean Strait. The selloff extended beyond equities, with the Korean won weakening 1.9% against the U.S. dollar and government bond yields rising across the 10-year spectrum. Financial institutions in Seoul reported a surge in trading volumes, with short-selling activity increasing by 72% compared to the previous week. The volatility index for the KOSPI, KRXV, spiked to 28.6, its highest level since late 2023. Global markets reacted with caution. Asian indices including Japan’s Nikkei 225 and China’s Shanghai Composite closed lower, while U.S. futures pointed to a negative open. Market participants are closely monitoring diplomatic channels and military movements in the region, with attention now shifting to upcoming intergovernmental consultations in Washington and Tokyo.