South Korean stocks fell 18% in two days. Can it happen here?

South Korean stocks quickly fell from grace after the US and Israeli attacks on Iran. But Wall Street doesn’t see that as a harbinger of anything to come in the US

criterion Kospi Index Wednesday fell more than 12% – its worst day of trading. Korean stocks have fallen more than 18% so far this week, on track for their biggest weekly loss since 2008.

South Korea’s stock market was dark on Monday, a national holiday. But the sharpest sell-off came on Tuesday when markets reopened on Tuesday in the wake of the Middle East conflict. Korea imports almost all of its fossil fuels, including oil and natural gas, which are all brought in by tanker. According to the US Energy Information Agency, about 70% of Korea’s oil imports and 30% of its liquefied natural gas come from the Middle East.

Both the US and Korean markets are described as concentrated in a handful of stocks. But while US investors are quick to point out that Korea’s concentration is greater than that of the US, US indices have not seen as dramatic gains as their international counterparts recently.

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

Concentration levels

Only a third of the Korean index is made up Samsung Electronics And SK HynixLarry Tentarelli of Blue Chip Trend Report noted. In comparison, the two largest stocks S&P 500 – Nvidia And Apple – 14% of the index, he said.

Samsung Electronics is up 216% over the past 12 months. While SK Hynix, the semiconductor maker, is up 356% over the past year, including its latest decline, Tentarelli said they were both “extremely stretched.” If Nvidia and Apple made such a run, the S&P 500 would be up more than 40% year to date. Instead, the S&P 500 was little changed in 2026.

“Those numbers were definitely short-term bubble numbers, which led to a sharp correction,” Tentarelli said.

SK Hynix and Samsung Electronics fell 10% or more in trading on Wednesday in Seoul, at one point temporarily suspending trading on the Korea Exchange, the country’s stock market.

While the U.S. market is “very headline driven,” with investor sentiment largely driven by geopolitical developments amid the U.S.-Iran war, Tentarelli said any index volatility would fade after the Kospi’s fall this week.

A 12% one-day drop in the US market would be “the end of the world,” Woods said. But Woods said he doesn’t believe such a slide is likely, given the broad diversification in the U.S., along with the NYSE and Nasdaq circuit breakers based on the S&P 500.

US market declines are often about breadth — and so far, especially considering the backdrop, breadth has held, Woods added.

Korea’s big run

Woods said the Korean market is more susceptible to a major correction after a rally of its size.

Despite this week’s turmoil, the Kospi is still up more than 20% in 2026 alone and up 100% over the past 12 months. In contrast, the S&P 500 is down a fraction in 2026 and up 19% from a year ago.

“When you see a 12% drop in the index in one of the biggest countries in the world, it’s earth-shaking,” Woods said. But, “To me, what we’re seeing in these foreign markets is that people are rushing to exit because they know they’re going to get better returns, and the selling is leading to some capitulation.”

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

Woods said the Kospi’s move was similar to the recent decline in precious metals and Peru’s market, which saw major declines after monster runs.

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

But he noted that they occurred over periods longer than the two-day shock in Korea. Mizuho’s trading desk told clients that Korean stocks had entered a bear market – and it “took only three days”.

Role of Retailers

Part of the sell-off can also be explained by the prevalence of small investors in Korea.

The iShares MSCI South Korea ETF (EWY) “It’s gone from retail lovers to retail investors rushing to exit,” WandaTrack analyst Viraj Patel wrote to clients.

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

Speculation among traders within the country also plays a role. Bloomberg reports that Korean investors are engaging in leveraged trading, betting on the country’s market.