Seoul: The South Korean currency fell sharply to a 17-year low against the U.S. dollar Tuesday as the escalating Middle East conflict fueled fears of further disruptions to global oil supplies and broader economic impacts. The won was quoted at 1,530.1 won per dollar, down 14.4 won from the previous session, extending its losing streak to a fifth consecutive session. Tuesday's level marked the lowest since March 9, 2009, on a closing basis, when the won hit 1,549 as the country grappled with the global financial crisis.
According to Yonhap News Agency, the Bank of Korea is closely monitoring the market as foreign investors have been selling local stocks heavily. Yoon Kyung-soo, director general of the Bank of Korea's international department, stated at a press briefing that the pace of the won's depreciation has been rapid. He emphasized that if market sentiment becomes overly one-sided and the won shows excessive divergence from other currencies, they would take action. The won has hovered around the psychologically significant 1,500 mark in recent sessions, as the war, which began in late February following U.S.-Israeli strikes on Iran, shows no sign of ending.
On the international front, U.S. President Donald Trump threatened to "completely obliterate" Kharg Island, a key oil hub, along with Iran's power plants and oil facilities if a peace deal is not reached shortly. Tehran has dismissed the U.S.' peace proposals as "unrealistic, illogical and excessive," while a parliamentary security committee approved a draft bill to introduce a toll system for the Strait of Hormuz, according to foreign media reports.
The escalating conflict has resulted in higher global oil prices, with U.S. West Texas Intermediate (WTI) crude futures for May delivery rising 3.25 percent to US$102.88 per barrel on Monday, surpassing the $100 mark on a closing basis for the first time since July 2022. Higher oil prices have pressured the won by boosting demand for dollars for crude imports, as South Korea relies heavily on imports for energy.
Heavy foreign selling of local shares has also added to the downward pressure on the currency. The benchmark Korea Composite Stock Price Index (KOSPI) fell 4.26 percent to 5,052.46 on Tuesday, as offshore investors dumped a net 3.84 trillion won ($2.51 billion) worth of shares. Analyst Lee Min-hyuk from KB Kookmin Bank noted that as the war drags on, concerns are emerging over a global economic slowdown driven by supply shocks in oil and other raw materials, with risk-off sentiment keeping the won at weaker levels.