'Iran Variable' Dampens Domestic Stock Market... Long-Term Impact Expected to Be Small

[Asia Economy Reporter Kum Boryeong] On the 5th (local time), the Iranian government officially announced that it will no longer abide by the freeze and limitation regulations on its nuclear program as stipulated in the nuclear agreement. This is interpreted as a move to effectively withdraw from the nuclear agreement. Earlier, on the 3rd, following the death of a key Iranian military figure due to a U.S. airstrike, Iran vowed harsh retaliation, and U.S. President Donald Trump also hinted at stronger reprisals, raising concerns about a potential military clash between the two countries.

The U.S. stock market reacted immediately. On the 3rd, the Dow Jones Industrial Average on the New York Stock Exchange (NYSE) closed at 28,634.88, down 233.92 points (0.81%) from the previous day. This was a stark contrast to the previous day’s record high of 28,872.80 points. The S&P 500 index fell 23 points (0.71%) to 3,234.85, and the Nasdaq Composite Index dropped 71.42 points (0.79%) to 9,020.77.

The domestic stock market is also expected to find it difficult to avoid the impact of this situation for the time being. Kim Yugyeom, head of the research center at Cape Investment & Securities, said, "The Iran factor will naturally act as a negative, but it should be seen only as increasing volatility for the time being. There have been concerns that the U.S. stock market has risen too much, so this could be an excuse for a correction, and naturally, we will be affected to some extent." He added, "More importantly, it is the U.S.-China trade agreement. The question is whether there will be any events to drive the market after the first trade agreement. After the first agreement, a second agreement must be reached, but there will be back-and-forth conflicts then."

Long-term analysis also suggests that this conflict will not have a significant adverse effect on the stock market. Iran finds it difficult to engage in full-scale war due to economic reasons, and the U.S. is also unlikely to enter a full-scale war considering military and economic burdens. Yoon Changyong, head of the research center at Shinhan Financial Investment, stated, "Although geopolitical tensions in the Middle East will escalate in the short term, historically, tensions that do not worsen oil supply and demand have had minimal impact on the real economy and financial markets, so we maintain our stance on cyclical economic rebound and financial market environment improvement."

Moon Dongyeol, senior researcher at Samsung Securities, also emphasized, "Political risk factors originating from the Middle East have mostly had only short-term negative effects on the domestic stock market based on experience," and "We do not expect this issue to change the fundamental direction in the mid to long term." Lee Jinwoo, head of the investment strategy team at Meritz Securities, analyzed, "Even in an extreme scenario akin to war, if it does not affect the real economy, the stock price will show a rapid recovery."

There is also an opinion that domestic factors are more likely to have a greater impact on the KOSPI than the Iran variable. Kim Hyungryeol, head of the research center at Kyobo Securities, pointed out, "This correction is a reaction to the rapid rise since the end of last year, not a signal of a full-fledged directional change," and added, "What is more important from our perspective is the impact of exports and corporate profits." He continued, "Numerically, our country's exports are expected to turn positive from this month due to the base effect, but we need to observe whether this is seen as a turning point or just a technical recovery."

However, concerns about volatility have manifested as interest in safe-haven assets. As of the 3rd, the won-dollar exchange rate closed at 1,167.5 won, up 8.5 won from the previous day. International gold prices also rose 1.62%, reaching $1,549.2 per ounce, approaching the 52-week high of $1,550.3.

This content was produced with the assistance of AI translation services.