[Real Investment Strategies] The "Three Highs" of Oil Prices, Interest Rates, and Exchange Rates Become the Biggest Variables in the Stock Market

Concerns Over Economic Growth Setbacks Amid Rising International Oil Prices
Stock Market Faces Greater Pressure If High Interest Rates and Exchange Rates Persist

As the war between the United States and Iran drags on, the three highs—high oil prices, high interest rates, and high exchange rates—are becoming the biggest variables in the Korean stock market. There is a growing outlook that the longer the war continues, the harder it will be to generate returns from stocks.

Concerns Over Economic Growth Retreat as War Drives Up International Oil Prices

According to Korea National Oil Corporation on April 8, West Texas Intermediate (WTI) crude oil from the United States was priced at $114.60 per barrel as of April 2. WTI, which was traded at around $67 per barrel on February 27, just before the outbreak of war between the United States, Israel, and Iran, has nearly doubled since the conflict began.

The rise in international oil prices places a significant burden on the Korean economy, which has a high dependence on petroleum. According to the Organisation for Economic Co-operation and Development (OECD), Korea has the highest petroleum consumption per unit of economic output among the 37 member countries. Reflecting the rise in international oil prices and other factors, the OECD revised its forecast for Korea’s economic growth rate for this year down from 2.1% to 1.7% in its interim economic outlook released on March 26.

Hyundai Research Institute, in a recently published report, projected that if the Strait of Hormuz is blocked and the average annual international oil price hovers around $100 per barrel this year, Korea’s growth rate will drop by 0.3 percentage points while the inflation rate will rise by 1.1 percentage points. In a scenario where the average annual international oil price soars above $150 per barrel, the growth rate is expected to fall by 0.8 percentage points and the inflation rate is projected to rocket by as much as 2.9 percentage points. Since domestic companies are overwhelmingly dependent on crude oil imports, rising oil prices directly translate into increased production costs. This is especially concerning for sectors with high energy consumption, such as airlines, transportation, and chemicals, where concerns over declining profitability are spreading and stock prices are falling.

On April 3rd, at a gas station in Yongsan-gu, Seoul, gasoline and diesel price notices are displayed. 2026.04.03 Photo by Dongju Yoon

Prolonged High Interest Rates and High Exchange Rates Add to Stock Market Pressure

Concerns about inflation driven by rising oil prices are entrenching the current ‘high interest rate’ environment. As interest rates rise, the securities market contracts. Due to inflation fears, market consensus is that the U.S. Federal Reserve will push back the timing of interest rate cuts. As a result, market interest rates have been rising steadily. The yield on 10-year U.S. Treasury bonds climbed by about 35 basis points (1bp=0.01 percentage point) just last month, marking the largest monthly increase since 2024.

Persistently high interest rates not only raise companies’ financing costs and dampen investment, but also increase the interest burden on small business owners and households, which could trigger a vicious cycle leading to a freeze in domestic consumption.

The won-dollar exchange rate has surpassed 1,500 won, delivering a ‘high exchange rate’ shock to the stock market. While in the past a rising exchange rate sometimes benefited export companies by boosting their price competitiveness, this positive effect has diminished due to diversified trading partners and a global economic slowdown. On the contrary, it is now the main culprit behind ‘imported inflation’, as it causes sharp increases in the prices of imported energy and raw materials, thus fueling domestic inflation. The stabilization of the exchange rate in the 1,500-won range also places a heavy burden on the stock market, as it could accelerate capital outflows by foreign investors.

Experts predict that the three highs are unlikely to be resolved easily anytime soon and that the difficulty of investing in stocks will increase. Paek Jongmin, Senior Research Fellow at Samsung Securities, said, “The aftermath of the war is triggering structural changes in the global investment environment,” adding, “The materialization of the three highs will weaken global economic growth prospects and sharply raise the level of difficulty for investing in the Korean stock market.”

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