Expectations of an easing conflict in the Middle East are splitting stock performance across sectors. Airline shares are rising on prospects for stable oil prices, while shipping stocks are falling on concerns over lower freight rates. Construction stocks are also gaining as hopes grow for reconstruction work.
Hanjin KAL (180640.KS) was trading at 128,400 won, up 4.99% from the previous session, as of 11:10 a.m. on the 26th, according to the Korea Exchange. Korean Air (003490.KS) was up 4.18% at 27,400 won. HMM (011200.KS), by contrast, was down 5.58%, while Pan Ocean (028670.KS) fell 12.23% and STX Green Logistics dropped 10.91%.
The gains in airline stocks and losses in shipping shares appear to stem from news of an easing Middle East conflict. Overnight, Russia's state news agency RIA Novosti reported that the United States and Iran had agreed to a ceasefire. According to the report, a Pakistani military source and an Iranian security source said a ceasefire agreement had been reached, including free navigation through the Strait of Hormuz. They said the ceasefire between the two countries would be announced within days.
An easing of the Middle East conflict could stabilize oil prices and improve airlines' profit margins. Shipping freight rates, which had surged on route changes and other factors, are likely to come down. As hopes for a de-escalation grew, global Brent crude and West Texas Intermediate (WTI) prices fell on the New York market overnight, and U.S. Treasury yields also steadied.
On the domestic market, reconstruction-related stocks such as builders are also rising. Hyundai Engineering & Construction (000720.KS) jumped 7.67% and GS Engineering & Construction (006360.KS) rose 7.57%. Several Korean builders, including Hyundai Engineering & Construction, GS Engineering & Construction and DL E&C, are reported to have experience winning construction contracts in Iran. If a peace agreement is reached, some Korean companies could take on reconstruction projects in Iran.
