Seoul: South Korea's stock markets are witnessing historic highs as the benchmark index Kospi closed at 7,384.56 points on Wednesday, marking its first finish above the 7,000 level. On Thursday, the index continued its upward trajectory, rising 1.43 percent to close at 7,490.05, after briefly surpassing 7,500. Despite the euphoria surrounding these gains, there are growing concerns about inflation and mounting debt risks.

According to Yonhap News Agency, the rally in the stock market is largely driven by the booming semiconductor industry in Korea. Companies like Samsung Electronics and SK hynix have seen significant gains due to the rising demand for artificial intelligence infrastructure, which has turned memory chips into strategic assets. In the first quarter, Korea's exports reached a record $219.9 billion, with semiconductor shipments alone soaring 139 percent to $78.5 billion.

The sustained rise of the Kospi, which has increased by 188.5 percent over the past year, is attributed to improvements in shareholder returns, corporate governance, and capital market transparency. However, the heavy reliance on the semiconductor industry, liquidity, and confidence in the AI cycle poses a risk of market dependency on a single narrative.

Inflation is another growing concern, with consumer prices rising 2.6 percent in April, the fastest increase in 21 months. The Middle East conflict has also contributed to a 21.9 percent jump in petroleum prices, affecting airfares, logistics, and household expenses. While price caps and fuel tax cuts have provided temporary relief, the structural pressures remain unresolved.

Geopolitical tensions add further uncertainty, as US President Donald Trump claimed that Iran attacked a Korean cargo vessel, renewing pressure on Korea to join maritime protection operations. This underscores Korea's vulnerability due to its dependence on exports and imported energy.

The Bank of Korea is reconsidering its monetary policy stance, with senior deputy governor Yoo Sang-dai suggesting a potential rate hike. This creates tension with the government's fiscal expansion plans, as President Lee Jae Myung supports active spending despite rising inflation expectations.

Household debt is another area of concern, with margin lending in the stock market climbing from 27 trillion won to around 36 trillion won since the end of last year. The risk of leverage in volatile markets remains significant.

While the symbolism of the Kospi surpassing 7,000 points highlights the maturity of Korea's capital markets and its pivotal role in the global AI economy, the benefits of the export boom must extend beyond chipmakers and financial assets to avoid widening the gap between market optimism and household reality. Markets can only outpace economies for so long before both realign to the same economic altitude.