High Oil Prices Are a Burden, and Now the Exchange Rate Hits 1,500 Won... Stock Market Impact Grows

Amid growing concerns over the prolonged situation in the Middle East, on the 16th, employees were monitoring the stock market and exchange rates in the dealing room at the Seoul Hana Bank headquarters as the KOSPI started the day recovering the 5500 level. On that day, the KOSPI opened at 5510.82, up 23.58 points (0.43%) compared to the previous trading day. March 16, 2026 Photo by Jo Yongjun

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The aftermath of the conflict between the United States, Israel, and Iran has pushed the won-dollar exchange rate above 1,500 won, increasing the burden on the Korean stock market. The sharp rise in import costs for raw materials due to the high exchange rate and mounting concerns over deteriorating corporate profits are negatively impacting the stock prices of related industries.

On March 16, the KOSPI opened at 5,510.82, up 0.43% from the previous trading day, and as of 9:48 a.m., it was trading at 5,527.41, up 0.73%. The KOSDAQ started at 1,156.50, up 0.31%, but soon reversed to record a decline of 0.44% at 1,148.06. Although bargain hunting was seen in some sectors such as semiconductors, concerns over a prolonged war in the Middle East and surging international oil prices are still weighing on the market.

During the day, the won-dollar exchange rate temporarily exceeded 1,500 won, raising concerns about sluggish stock prices in industries vulnerable to a high exchange rate. The airline industry is considered one of the most affected, as most of its costs-including jet fuel, maintenance, and lease fees-are settled in U.S. dollars. A high exchange rate could weaken passenger demand, and the recent rise in international oil prices has increased fuel costs. This is the reason why the stock prices of major airlines such as Korean Air, Jeju Air, and Jin Air have dropped by more than 10% just this month. Choi Minki, Senior Researcher at Shinhan Investment & Securities, explained, "The higher the dollar price goes, the more airline operating profits decline," adding, "Since jet fuel is generally settled in U.S. dollars, the exchange rate is a key factor in airline performance."

The petrochemical sector also sources all of its basic raw materials, such as crude oil and naphtha, in dollars, so when the dollar becomes more expensive, costs rise sharply and profit structures deteriorate. The stock prices of major petrochemical companies such as LG Chem, Kumho Petrochemical, and Lotte Chemical have dropped by more than 10-20% this month, with the high exchange rate compounding the impact of soaring oil prices. The steel industry, too, imports most of its key raw materials, such as iron ore and coking coal, in dollars, so a high exchange rate adds to cost pressures. Stock prices of leading steelmakers including POSCO Holdings and Hyundai Steel have also fallen by around 20% this month.

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Food companies that import flour and other ingredients are also adversely affected by a stronger dollar. Korean food companies rely heavily on imports for major raw materials such as wheat, soybeans, corn, and raw sugar. When the cost of imported raw materials rises, there is greater pressure to raise product prices, but in reality, it is difficult to immediately reflect this in higher food prices. As a result, the stock prices of major food manufacturers like Samyang Foods and Nongshim have fallen by more than 10% this month.

Among financial sectors, banks are particularly vulnerable to the high exchange rate. When the exchange rate rises, the scale of banks' foreign currency risk-weighted assets (RWA) increases, adversely affecting their capital adequacy ratios such as the CET1 ratio. Since banks' foreign currency liabilities exceed their foreign currency assets, exchange rate gains and losses can occur as the won weakens. The sluggish stock performance of major financial holding companies such as KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group this month is partially attributed to the impact of the exchange rate.

In addition, the pharmaceutical and biotech industries are also highly dependent on imports of active pharmaceutical ingredients and are conducting active clinical trials overseas, meaning that high exchange rates significantly increase their cost burden. Korean pharmaceutical companies depend heavily on importing active pharmaceutical ingredients and materials, so when import costs rise, profits are damaged. The textile and fashion sectors, as well as travel, are also identified as industries that could suffer if the high exchange rate persists.

If the war in the Middle East drags on, there is a possibility that the average monthly won-dollar exchange rate could exceed 1,500 won. Park Hyungjung, Economist at Woori Bank, predicted, "If high oil prices persist, structural pressure will mount for the won to weaken, and the exchange rate could remain above 1,500 won for a prolonged period," adding, "In the worst-case scenario, if soaring oil prices and a global economic slowdown coincide, the rate could rise to around 1,600 won." The Economic Research Institute at IBK Industrial Bank of Korea analyzed that if the monthly average won-dollar exchange rate breaks through 1,500 won, consumer prices could rise by up to 7% after three months, and exports could decrease by up to 9% after nine months, placing a heavy burden on the Korean economy.

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