A steep run-up in global oil prices driven by supply concerns in the Middle East is spreading through South Korea's stock market. Airlines, chemical makers and other industries that use crude and petroleum products as fuel or feedstock face heavier costs, while even refiners — normally seen as beneficiaries of higher oil prices — have weakened.
Shares of SK Innovation (096770) fell 1.16% to 136,700 won from 138,300 won between the 4th and the 14th of this month, according to the Korea Exchange. Over the same period, S-Oil (010950) dropped 5.53% and GS lost 6.05%.
Higher crude prices normally lift refiners' earnings by boosting inventory valuation gains and the selling prices of petroleum products. This time, however, the price of Middle Eastern crude has surged in a short span, driving up purchase costs just as quickly. Dubai crude, South Korea's main import grade, jumped to $123.66 a barrel on a closing basis as of the 11th, up 21.3% from $101.91 on the 4th, according to Korea National Oil Corp. The complex refining margin, a key gauge of refiners' profitability, also fell to $26.4 a barrel from $33.6, marking a sixth straight week of decline. With refiners unable to translate higher oil prices into profit, their shares have failed to gain traction.
Airlines and chemical makers, for which high oil prices are especially damaging, are in the same position. Over the same period, Korean Air (003490) fell 1.16% to 29,850 won from 30,200 won, and LG Chem (051910) dropped 4.96% to 268,000 won from 282,000 won. When crude prices rise, jet fuel prices follow, leaving airlines with higher fuel bills. Petrochemical companies rely on naphtha and other crude-derived materials as key feedstock, so the longer high prices last, the greater the cost burden.
The sharp rise in Dubai crude is a particular strain for Korean companies. If geopolitical tensions in the Middle East persist, shipping and insurance costs could climb alongside crude prices. That would raise the total cost of importing crude and squeeze corporate profitability. "Concerns that the war could continue even after the midterm elections have grown, pushing WTI above $100 a barrel," said Kwon Hee-jin, an analyst at KB Securities. "The surge in oil prices has continued ahead of policy meetings by global central banks, bringing in caution over monetary tightening."
Worries over artificial intelligence investment in the U.S. added to the pressure, sending Korean stocks sharply lower on the 14th. After executives at major AI companies raised the need to slow the pace of AI development, selling hit semiconductor and other AI-related shares. The KOSPI closed at 6,684.37, down 225.54 points, or 3.26%, from the previous session. Samsung Electronics (005930) finished 4.05% lower at 249,000 won, and SK hynix (000660) tumbled 6.35% to 1.697 million won. Foreign investors sold a net 3.2995 trillion won on the day, extending their selling streak to a fourth consecutive session since the 9th.
Amid the increased volatility, the Korea Exchange opened its after-hours market for the first time on the same day. Running from 4 p.m. to 8 p.m. after the regular session closes, on a continuous auction basis, it allows investors to trade Korean stocks in real time on the KRX as well as on Nextrade. That effectively extends the trading window available to respond to external variables that emerge after the regular session, such as global oil prices and U.S. equities.
