'Adding Insult to Injury' for Construction Stocks... US-Iran Conflict and Declaration of 'Real Estate Speculation War'

On the 8th, the Construction Industry Index recorded 85.8, a 4.1% decrease from the previous day

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[Asia Economy Reporter Geum Bo-ryeong] Amid the conflict between the United States and Iran dealing a blow to construction stocks, the government's declaration of a 'war on real estate speculation' has added insult to injury.

According to the Korea Exchange on the 9th, the construction industry index recorded 85.8 the previous day. This is a 4.1% (3.7 points) drop from the 7th. It is the largest decline since the announcement of the private housing price ceiling system last July. The yield showed -7.4%.

The biggest reason for the frozen investment sentiment in construction stocks is the conflict between the US and Iran. This is because the Middle East region is the largest overseas order source for domestic construction companies. On the 3rd (local time), following a US airstrike that killed a key Iranian military figure, Iran vowed retaliation, and on the 8th, Iran launched missiles at US military bases in Iraq, worsening the situation. In particular, if Iran blocks the Strait of Hormuz, it could affect the procurement of ongoing construction projects in Middle Eastern countries. The countries affected by the Strait of Hormuz blockade include most Middle Eastern countries such as the United Arab Emirates (UAE), Bahrain, Qatar, Kuwait, and Iraq.

To make matters worse, President Moon Jae-in stated in his New Year's address on the 7th, "We will never lose the war against real estate speculation." The government's increased likelihood of tightening regulations on the housing market to stabilize housing prices acted as a negative factor for construction stocks.

Before the US-Iran conflict began, GS Construction's closing price was 30,050 KRW on the 3rd, but it fell 9.34% to 27,650 KRW in just three trading days. During the same period, Hyundai Construction dropped 8.17% from 41,000 KRW to 37,650 KRW, and Daewoo Construction fell 10.44% from 4,695 KRW to 4,205 KRW. This contrasts with the KOSPI, which fell 1.16%.

However, there is also analysis that if the rise in international oil prices caused by the Iran situation continues long-term, it could actually become a momentum for construction stocks. Baek Gwang-je, a researcher at Kyobo Securities, explained, "There is a possibility of increased orders and margin improvement due to improved finances of oil-producing countries (clients)." He added, "In the early to mid-2000s, international oil prices soared to $140 per barrel in 2008, driven by increased oil demand from China and the escalation of Middle East tensions due to the start of Iran's nuclear facility construction. During the same period, the construction industry index recorded a peak of 455.92, enjoying a boom period?the highest since 2000."

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