EWY Plunges as KOSPI Posts Worst Day Ever After Iran Strikes Qatar LNG Hub

What Happened

On March 4, the KOSPI sank 12.1% to close at 5,093.54, eclipsing even the 12.02% single-day drop triggered by the September 11, 2001 attacks. The Korea Exchange activated circuit breakers on both KOSPI and KOSDAQ — halting trading for 20 minutes after the index fell more than 8% — the first dual-market circuit breaker activation since August 2024.

The carnage was concentrated in the heavyweights that had powered the KOSPI's prior rally. Samsung Electronics fell nearly 12% and SK Hynix dropped 11.5%, together comprising roughly half of EWY's weight. The semiconductor pair had been the engine behind the KOSPI's doubling to 6,000 earlier this year — and they became the anchor dragging it down.

EWY on US exchanges dropped 8.45% over the week, falling from $144.55 to $132.34. Hyperliquid's 24/7 perp market captured the full drawdown in real time, with $40.6M in volume trading through the crash at $125.10 — reflecting the continued bleed and perp-specific dynamics.

Why It Moved

The catalyst chain starts on February 28, when the United States and Israel launched coordinated strikes on Iran, following the breakdown of US-Iran nuclear negotiations. Iran retaliated on March 2 by sending drones at QatarEnergy's Ras Laffan Industrial City — the world's largest LNG export facility — and a power plant at Mesaieed Industrial Area. QatarEnergy immediately halted LNG production, taking roughly 20% of global LNG supply offline.

For South Korea, this was an existential hit. The country imports nearly all its fossil fuels by tanker, with approximately 70% of its oil and up to 30% of its LNG sourced from the Middle East. European gas prices surged more than 50% on the news. For an economy that already runs one of the most energy-intensive manufacturing bases in the world — anchored by chip fabs and shipyards — spiking LNG prices are a direct margin killer.

The selloff was amplified by deleveraging. Korean retail investors had piled into leveraged instruments tied to Samsung and SK Hynix during the rally to 6,000. When the index broke, panic selling triggered forced liquidations that fed on themselves. The won hit a 17-year low against the dollar, adding further pressure on foreign-held positions.

What to Watch

The KOSPI rebounded nearly 10% on March 5 as initial panic subsided and oil prices stabilized. Historical data suggests Korean stocks typically recover within 30 days after circuit breaker events, but this time the underlying geopolitical risk hasn't resolved.

The critical variables: whether QatarEnergy can restart Ras Laffan production (and how quickly), whether the US-Iran conflict escalates further or de-escalates, and whether the Strait of Hormuz — through which much of Korea's energy imports transit — remains open. If Hormuz sees disruption, the KOSPI's 12% crash could look like a warm-up.

On the positioning side, the deleveraging in Samsung and SK Hynix may have run its course short-term, but the valuation reset is real. The KOSPI had been trading at stretched multiples after its run to 6,000, and the MSCI South Korea P/E ratio is now back to levels that historically attract value buyers. Watch the won for signals — currency stabilization would be the first sign that foreign capital outflows are slowing.

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