KOSPI plunges nearly 9% as chip rout and Hormuz crisis collide

South Korea's benchmark Kospi plunged 8.95% on Monday, shedding 669 points to close at 6,806.93 and falling below the 7,000-point mark for the first time in more than two months. The crash, which analysts are calling a "Black Monday" selloff, was driven by a deepening semiconductor stock rout and fresh geopolitical turmoil after Iran declared the Strait of Hormuz closed over the weekend.tradingeconomics+1

Semiconductor Stocks Lead the Decline

The selling was concentrated in the chip stocks that had powered the Kospi's remarkable 2026 rally. SK Hynix collapsed more than 15%, while Samsung Electronics fell over 10%. Foreign investors dumped an estimated 1.7 trillion won worth of shares as expectations grew that the Bank of Korea would raise interest rates later this week.watcher+1

The unwinding of leveraged exchange-traded funds built on Samsung and SK Hynix — retail-heavy products whose combined assets had ballooned to roughly 14 trillion won — has amplified losses during the Kospi's slide from its June record. The index, which hit an all-time high of 9,114.55 on June 22, has now lost more than 25% from that peak.reuters+1

The Korea Exchange activated a market-wide circuit breaker after the index remained more than 8% below the previous session's close. It marked the seventh such halt this year, following a sixth circuit breaker triggered on July 7.youtube+1

Geopolitical Crisis Compounds Market Fears

The selloff intensified after Iran declared the Strait of Hormuz closed on Saturday, following an Iranian attack on a Cyprus-flagged container ship attempting to transit the waterway. The United States launched a third round of strikes against Iran in response, according to U.S. Central Command, escalating a cycle of military exchanges between the two nations that stretched into Monday.washingtonpost+2

Iran's Revolutionary Guard said the strait would remain closed until further notice after striking the vessel for using an "unauthorized route". The Washington Post reported that both sides struck numerous military targets on Sunday, with Iran firing missiles and drones at U.S. bases across Jordan, Qatar, Kuwait, Bahrain, and Oman.wmtw+1

A Broader Asian Rout

The damage extended well beyond Seoul. The Kospi, which had been the world's best-performing major stock index in 2026 with gains of 74% at one point, has entered bear market territory, defined as a decline of 20% or more from its peak. Business Insider reported that the chip selloff also rippled into Japan earlier this month, dragging the Nikkei 225 lower as chipmaker volatility intensified.economictimes+2

The convergence of an overheated semiconductor trade, leveraged product unwinding, and an escalating Middle East conflict has left investors scrambling. Analysts have urged caution over panic, with Mirae Asset Securities advising investors to monitor whether "the downward trends in exchange rates, interest rates, foreign investor demand, and large semiconductor stocks are subsiding" before acting.chosun