KOSPI Crumbles Under Triple Shock of Rates, Oil Prices, and Dollar

The KOSPI index in South Korea broke below the 7,000 mark just two days after reclaiming it. This sudden drop was caused by a 'triple shock' of rising rates, oil prices, and the dollar. The Middle East-driven oil price surge pushed West Texas Intermediate (WTI) crude futures up 6.69% to $102.48 per barrel.

The U.S. Labor Department reported that August producer prices rose 5.4% year-over-year, exceeding market expectations of 5.3%. This inflationary pressure sent the probability of a Federal Reserve rate hike soaring to as high as 90%, according to the CME FedWatch tool.

South Korea's 3-year government bond yield closed at 4.014%, breaching 4% for the first time since November 2023. The won-dollar exchange rate also spiked, closing at 1,345.9 won in Seoul's foreign exchange market.