Seoul: South Korean stocks pared earlier losses to close nearly unchanged Friday on a growing appetite for autos and defense firms amid the ongoing Middle East crisis. The local currency fell against the U.S. dollar.

According to Yonhap News Agency, starting 1.66 percent lower, the Korea Composite Stock Price Index (KOSPI) turned positive in the afternoon to close at 5,584.87, up 0.02 percent, or 0.97 point. The index has experienced significant volatility this week due to the Middle East conflict, with a sharp decline followed by a substantial rebound.

Trade volume was at 1.2 billion shares worth 31.2 trillion won (US$21.2 billion), with gainers outnumbering decliners 524 to 360. Individual investors purchased 2.9 trillion won worth of stocks, while foreigners and institutions sold a net 1.1 trillion won and 1.9 trillion won, respectively.

Analysts noted that while the local financial market has been largely affected by geopolitical developments in the Middle East, it still possesses strong elements that contributed to the index's recovery. Lee Kyoung-min, an analyst from Daishin Securities, stated, "It seems that the KOSPI experienced a readjustment following the previous session's 10 percent surge." He added that the market showed massive volatility throughout the week, but bargain hunters supported the 5,500-point line.

Auto, defense, and battery shares performed well. Hyundai Motor rose 0.91 percent to 553,000 won, and its auto parts affiliate Hyundai Mobis gained 2.78 percent to 444,000 won. Defense company Hanwha Aerospace soared 7.24 percent to 1.48 million won, and LIG Nex1 surged 9.31 percent to 834,000 won. Leading battery maker LG Energy Solution increased 1.62 percent to 377,500 won, while POSCO Future M climbed 3.61 percent to 215,500 won.

In the tech sector, major game maker NCSOFT rose 4.89 percent to 214,500 won, and Netmarble advanced 11.34 percent to 54,000 won. However, chip giant Samsung Electronics fell 1.77 percent to 188,200 won, and SK hynix dropped 1.82 percent to 924,000 won.

The Korean won was quoted at 1,476.4 won against the U.S. dollar at 3:30 p.m., down 8.3 won from the previous session. Bond prices, which move inversely to yields, closed lower, with the yield on three-year Treasurys adding 3.8 basis points to 3.227 percent, and the return on the benchmark five-year government bonds gaining 3.0 basis points to 3.472 percent.