[Good Morning Market] Reports of U.S.-Iran Backchannel Contacts... Korean Stock Market Likely to Rebound

Boosted by reports of behind-the-scenes contact between the United States and Iran, as well as positive economic indicators, the New York stock market closed higher. In particular, hopes that the conflict between the United States and Iran may end sooner than expected led to a partial resurgence of risk-on sentiment. There are also forecasts that the domestic stock market will see a strong rebound effect as it seeks to recover previous losses.

On the 4th, in the dealing room of Hana Bank's headquarters in Jung-gu, Seoul, the KOSPI, KOSDAQ, and won/dollar exchange rate are displayed as the KOSPI plummeted to an all-time low, falling below the 5,100 mark due to the outbreak of war between the United States and Iran. Photo by Yonhap News Agency

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On the 4th (local time), the Dow Jones Industrial Average closed at 48,739.41, up 238.14 points (0.49%) from the previous session. The S&P 500 closed at 6,869.50, down 52.87 points (0.78%) from the previous session, while the tech-heavy Nasdaq Composite ended at 22,807.48, up 290.79 points (1.29%). Large-cap technology stocks led the rally. Tesla and Amazon climbed by 3.44% and 3.95%, respectively, while Nvidia and Meta rose by 1.66% and 1.93%, respectively.

The New York Times (NYT) reported that a day after the U.S. and Israeli airstrikes, Iranian intelligence authorities proposed negotiations for ending the conflict to the CIA via a third country. As a result, international oil prices, which had surged for two consecutive days, paused for breath, while cryptocurrency prices rose.

At the ICE Futures Exchange, May Brent crude futures settled unchanged from the previous session at $81.40 per barrel, while April West Texas Intermediate (WTI) futures rose 0.1% to $74.66 per barrel on the New York Mercantile Exchange.

Bitcoin prices continued to rise, climbing more than 7% to surpass $73,000. Ethereum also jumped more than 9% to trade around $2,140. The value of the U.S. dollar fell for the first time in three trading sessions. The dollar index, which measures the value of the dollar against six major world currencies, dropped 0.3% from the previous day to 98.93.

Scott Wren of Wells Fargo Investment Institute stated that while the risk of further escalation remains, the expansion of market risk aversion is likely to be short-lived. Peter Oppenheimer’s team, in a report, noted that although risk assets are facing considerable headwinds due to concerns over the Middle East war and artificial intelligence (AI)-driven market volatility, fundamental economic resilience and solid earnings growth should limit the downside.

Private sector employment in the United States also increased significantly, surpassing market expectations and lending further strength to the stock market rally. According to a tally by Automatic Data Processing (ADP), U.S. private sector employment increased by 63,000 jobs in February compared to the previous month. This figure, which exceeds the Dow Jones expert forecast of 48,000, represents the largest gain since July 2025.

Ji-Young Han, a researcher at Kiwoom Securities, said, "Now is not a time to sell, but a time to buy," adding, "Today, the domestic stock market is expected to rebound, led by previously oversold leading stocks, recovering from yesterday’s sharp plunge." He noted that the fact KOSPI recorded -18% just two trading days after the outbreak of the Middle East crisis suggests that most of the war risk has already been priced in. The current 12-month forward price-to-earnings ratio (PER) for the KOSPI has fallen to about 8.1 times. In KOSPI’s history, the forward PER dropping to the low 8s or below has only occurred during the global financial crisis, the European debt crisis, the U.S.-China trade dispute, and the COVID-19 mutual tariff announcements, and the market previously established a bottom at the 8-times level.

Sang-Young Seo, a researcher at Mirae Asset Securities, stated, "Following the U.S. Department of Defense’s announcement of strengthened control over Iran and reports of Iranian attempts at negotiation, we expect a strong rebound as the market attempts to recover previous losses." He added, "If the Iran conflict remains within a controllable range, a sharp rebound in the index is likely."

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