【Iran Crisis】 Soaring oil prices drag down Asia-Pacific stocks "Black Monday" Japan and South Korea stocks both fall over 7% South Korea reportedly considers implementing an oil price cap mechanism

The ongoing escalation of tensions in the Middle East has pushed international oil prices above $100 per barrel, causing Asian-Pacific stock markets to plunge on Monday (the 9th). The Japanese stock market briefly fell below 52,000 points, and South Korea’s KOSPI index also dropped more than 7%.

After opening more than 1,000 points lower, the Nikkei continued to decline, currently down over 3,906 points, at 51,714 points, a 7.02% decrease. Similarly, the Korean KOSPI index has fallen 439 points to 5,144, a decline of 7.88%.

Notably, the Korea Exchange triggered an emergency mechanism for the KOSPI, which fell 5% due to the decline in KOSPI 200 futures, temporarily halting trading for five minutes.

Market analysts say that the Japanese and Korean stock markets have suffered heavy sell-offs amid the rising Middle East geopolitical tensions, mainly due to their near-total dependence on Middle Eastern oil. According to the latest data from Japan’s Ministry of Economy, Trade and Industry, Japan relies on Middle Eastern oil for 95.1% of its imports, most of which must pass through the now-closed Strait of Hormuz. South Korea faces a similar situation, with a high dependence on energy imports, and the Middle East is a key supply source.

Additionally, South Korean media reports that, in response to the escalating Middle East conflict, the South Korean government is considering activating an oil price cap mechanism for the first time in nearly 30 years.

Reports indicate that the U.S.-Iran conflict has triggered a surge in global crude oil prices, which has almost immediately reflected in local fuel prices—unlike the usual two-week lag—prompting the government to evaluate implementing price controls. Under Article 23 of the Petroleum and Alternative Fuels Business Act, the Minister of Industry can designate a maximum selling price when oil prices fluctuate sharply and threaten economic stability.

South Korea has not used this provision since deregulating oil prices in 1997. The government is now assessing potential side effects, including market distortions and fiscal burdens.

Financial Hot Talk

Will the threat to oil supply from Middle East conflict push prices over $100? Could this impact the global economy?