Escalating tensions in the Middle East after U.S. and Israeli military actions against Iran, resulting in the death of Iranian Supreme Leader Ayatollah Ali Khamenei, have increased worries regarding possible effects on the Korean economy and simultaneously boosted investor confidence in various key sectors.
Amid concerns that the current conflict in the oil-rich area might interrupt shipments via the Strait of Hormuz, investors in the Korean stock market focused on defense, refinery, and shipping companies on Tuesday, marking the first trading day since the war began.
LIG Nex1 reached the daily maximum price limit of 661,000 won ($451), primarily due to optimism surrounding its M-SAM II mid-range surface-to-air missiles. The system has been supplied by the company to Saudi Arabia and the United Arab Emirates, which are currently facing retaliatory strikes from Iran aimed at U.S. Arab allies.
Other significant South Korean defense firms, such as Hanwha Systems, Hanwha Aerospace, Hyundai Rotem, and Poongsan, experienced substantial increases as well.
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Analyst Chae Un-sam from Hana Securities stated that a possible lack of missiles that can counter Iranian ballistic threats might increase the demand for the M-SAM II, which he referred to as a budget-friendly substitute for the U.S. Patriot missile system.
“Regardless of whether the war concludes earlier than anticipated, nations in the Middle East are expected to boost arms imports to brace for ongoing instability in the area,” Chae remarked.
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In the refining industry, S-Oil's shares rose 28.45 percent to 141,300 won from 110,000 won due to expectations that increasing global oil prices will enhance refining margins
Joong Ang Enervis and Hung-gu Oil, both marketing petroleum in the local market, also reached their daily maximum price limits.
"S-Oil's management of refining facilities in a conflict-free Asian area provides it a geopolitical edge during the crisis," stated Samsung Securities analyst Cho Hyun-ryul.
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Shipping companies are projected to experience increased income if interruptions in the Strait of Hormuz lead to higher freight costs. The Korea International Trade Association cautioned that shipping expenses on redirected routes, such as those passing through key ports in Oman, might increase by 50 to 80 percent.