The South Korean currency fell sharply to a 17-year low against the US dollar on Tuesday. This currency pressure stems from the escalating Middle East conflict, which has fueled fears of further disruptions to global oil supplies. The won closed at 1,530.1 per dollar, down 14.4 won from the previous session. The currency extended its losing streak to a fifth consecutive day.
Tuesday’s level marked the lowest closing since March 9, 2009. Back then, the won hit 1,549 as the country grappled with the global financial crisis. The won has hovered around the psychologically significant 1,500 mark in recent sessions. The war, which began in late February following US-Israeli strikes on Iran, shows no sign of ending. Consequently, this currency pressure shows no immediate relief.
US President Donald Trump threatened on Monday to completely obliterate Kharg Island, a key Iranian oil hub. He also threatened Iran’s power plants and oil facilities if Tehran does not reach a peace deal with Washington shortly. Tehran has dismissed the US’ peace proposals as unrealistic, illogical, and excessive. Moreover, an Iranian parliamentary security committee approved a draft bill to introduce a toll system for the Strait of Hormuz.
The escalating conflict pushed global oil prices higher. US West Texas Intermediate crude futures for May delivery rose 3.25 percent to $102.88 per barrel on Monday. This marked the first time oil closed above $100 since July 2022. Higher oil prices pressure the won by boosting demand for dollars for crude imports. South Korea relies heavily on imports for energy. Therefore, this currency pressure connects directly to energy costs.
Heavy foreign selling of local shares also added to the downward pressure on the won. The benchmark KOSPI fell 4.26 percent to 5,052.46 on Tuesday. Offshore investors dumped a net 3.84 trillion won worth of shares during the session. This selling accelerated as risk aversion spread through global markets.
“As the war drags on, concerns are now emerging over a global economic slowdown driven by supply shocks in oil and other raw materials,” said KB Kookmin Bank analyst Lee Min-hyuk. “Risk-off sentiment is keeping the won at weaker levels.” His assessment highlights how this currency pressure reflects broader economic anxieties.
The won’s decline has outpaced most other major currencies this month. Foreign investor selling has focused heavily on Korean equities. The war has effectively closed the Strait of Hormuz, a critical energy chokepoint. Korea depends heavily on oil imports through this waterway. Consequently, this currency pressure stems from both geopolitical and energy market factors.
Importers are feeling the pinch from the weaker won. Energy costs have risen sharply as the currency has fallen. Consumer prices may face upward pressure in coming months. The government has already introduced fuel price caps and a supplementary budget. However, those measures cannot fully offset the impact of sustained currency pressure.
The Bank of Korea has monitored the situation closely. The central bank may consider intervention if volatility intensifies further. However, intervention would only slow the decline, not reverse it. The fundamental drivers of currency pressure remain in place. Policymakers face difficult choices between defending the won and preserving reserves.
The South Korean won hit a 17-year low of 1,530.1 per dollar on Tuesday. This currency pressure reflects escalating Middle East conflict, oil prices above $100, and heavy foreign selling of Korean stocks. The war shows no sign of ending, and analysts expect further volatility. The won’s weakness has direct implications for importers, consumers, and the broader economy. Policymakers face difficult trade-offs as they navigate this currency pressure. The coming weeks will test whether intervention can slow the decline or whether fundamental forces will continue driving the won lower. The outcome depends heavily on whether geopolitical tensions ease or oil prices climb further.
