The South Korean Won (KRW) plummeted to a 17-year low against the US Dollar (USD) on Tuesday, as escalating tensions in the Middle East intensified concerns about potential disruptions to global oil supplies and broader economic repercussions.
The KRW/USD exchange rate reached 1,530.1, a decrease of 14.4 Won from the previous trading session, marking the fifth consecutive day of decline.
This is the lowest closing level since March 9, 2009, when the Won traded at 1,549 against the dollar during the global financial crisis.
The Won has been fluctuating around the psychologically significant 1,500 level in recent trading sessions, as the ongoing conflict, which began in late February following reported US-Israeli strikes on Iran, continues without resolution.
On Monday (US time), reports indicated that US President Donald Trump threatened to “completely obliterate” Kharg Island, a crucial Iranian oil hub, alongside Iran’s power plants and oil infrastructure if a peace agreement with Washington isn’t reached “shortly.”
Tehran has reportedly rejected the US’s peace proposals, deeming them “unrealistic, illogical, and excessive,” while a parliamentary security committee is said to have approved a draft bill to implement a toll system for vessels passing through the Strait of Hormuz, according to international media reports.
This escalating conflict has driven global oil prices upward. West Texas Intermediate (WTI) crude oil futures for May delivery surged by 3.25 percent to $102.88 per barrel on Monday (US time), surpassing the $100 mark on a closing basis for the first time since July 2022.
Increased oil prices have exerted downward pressure on the Won by increasing the demand for US dollars to finance crude oil imports. South Korea is highly dependent on energy imports.
Significant foreign selling of South Korean stocks has further contributed to the currency’s depreciation.
The Korea Composite Stock Price Index (KOSPI) benchmark fell by 4.26 percent to 5,052.46 on Tuesday, as foreign investors net sold 3.84 trillion Won ($2.51 billion) worth of shares.
