South Korea stocks crashed 18% in two days. Could it happen here?

After the US and Israel’s attacks on Iran, South Korean stocks fell rapidly. But Wall Street doesn’t see this as a harbinger of anything to come in the US

Criterion Kospi Index It fell more than 12 percent on Wednesday — its worst trading day ever. Korean stocks have lost more than 18% so far this week and are on track for their biggest weekly loss since 2008.

South Korea’s stock market was dark on Monday due to a national holiday. However, when markets reopened on Tuesday following the conflict in the Middle East, there was a sharp selling wave. Korea imports almost all of its fossil fuels, including oil and natural gas, and all of them are brought in by tanker. Approximately 70% of Korea’s oil imports and up to 30% of liquefied natural gas come from the Middle East. According to the US Energy Information Agency.

It is stated that both the US and Korean markets are concentrated in a handful of stocks. However, US investors were quick to point out that the concentration in Korea is much higher than even in the US. Moreover, US indices have not seen rises as dramatic as their international counterparts recently.

“It’s all about perspective,” said Jay Woods, chief market strategist at Freedom Capital Markets.

Concentration levels

More than a third of the Korean index is only Samsung Electronics And SK HynixLarry Tentarelli of Blue Chip Trend Report noted: Compared, the world’s two largest stocks S&P 500 — Nvidia And Apple He said that it constitutes 14% of the index.

Samsung Electronics has increased by 216% in the last 12 months. Tentarelli said semiconductor maker SK Hynix was up 356% last year, including the recent decline, and both were “extremely extended.” If Nvidia and Apple had such a rally, the S&P 500 would be up more than 40% to date. Instead, the S&P 500 is little changed in 2026.

“These numbers are definitely short-term bubble numbers that lead to a sharp correction,” Tentarelli said.

SK Hynix and Samsung Electronics fell 10% or more in trading in Seoul on Wednesday, at one point prompting a temporary halt to trading on the country’s stock exchange, the Korea Exchange.

Although the US market is “very focused on the headlines” as geopolitical developments boost investor confidence amid the US-Iran war, Tentarelli said any index volatility would pale in comparison to the Kospi’s decline this week.

Woods said a one-day 12 percent drop in the U.S. market would feel like “the end of the world.” However, due to the wide diversification in the US along with NYSE and Nasdaq circuit breakersWoods, both based on the S&P 500, said he did not believe such a decline was likely.

Crashes in the US market are usually width Woods added that so far the width has been maintained, especially considering the background.

Korea’s big run

Woods also said the Korean market is more susceptible to a major correction after an outsized rally.

Despite this week’s turmoil, the Kospi is up more than 20% in 2026 alone and 100% in the last 12 months. By contrast, the S&P 500 is up 19% in 2026, a marginal increase from the previous year.

“To see a 12% drop in an index in one of the world’s greatest countries is earth-shattering,” Woods said. But “to me, what we’re seeing in these foreign markets is people are rushing to the exits because they know they’re making a good profit, and sales are leading to some capitulation.”

Korea is the world’s 14th largest economy According to the International Monetary FundIt is larger than Australia, the Netherlands and Saudi Arabia.

Woods said the Kospi’s move was similar to recent declines in precious metals and the Peruvian market, which saw big declines after the monster influx.

Woods acknowledged that the US market has faced significant declines in recent years due to the Covid pandemic, the rise in interest rates and inflation and President Donald Trump’s tariffs.

However, he noted that these occurred over longer periods of time than the two-day shock in Korea. Mizuho’s trading desk told clients that Korean stocks had entered a bear market and that it “only lasted three days.”

The role of retail traders

Some of the sales can also be explained by the prevalence of small investors in Korea.

iShares MSCI South Korea ETF (EWY) “It has gone from being a retail darling to retail investors rushing for the exits,” VandaTrack analyst Viraj Patel wrote to clients.

The fund broke a record by generating $266 million in net flows from retail investors in one month, eight times the previous high. The ETF saw its highest-volume trading day in its history on Tuesday.

Speculation among traders within the country may also play a role. Korean investors are flocking leveraged transactionsAccording to Bloomberg’s report, bets are being placed on the country’s market.