The Korean stock market is currently grappling with significant fluctuations amidst geopolitical tensions in the Middle East, primarily driven by escalating oil prices which recently surpassed $100 per barrel after the outbreak of war. This has resulted in a drastic drop in the KOSPI index, which saw its largest decline ever at 12.06% on October 4, and approximately a 20% decline within just two business days of the conflict's initiation. In contrast, stock markets in the US and Israel have remained relatively stable or even risen, highlighting a unique and concerning trend within the Korean market.

The volatility in the Korean stock market cannot solely be attributed to the fear of rising oil prices, particularly given the country's high dependency on energy imports and Middle Eastern oil. It seems likely that a massive movement of capital into and out of the stock market, referred to as "money move," has played a critical role in triggering this volatility. Prior to the Middle Eastern crisis, the stock market had benefitted significantly from a super cycle in semiconductors and unprecedented inflows of domestic capital, leading to a remarkable 48% increase in the KOSPI index since the beginning of the year despite substantial foreign sell-offs.

Looking ahead, the question remains whether the inflow of domestic capital into the stock market will resume, and indicators suggest a high likelihood of this happening. The fundamentals supporting the semiconductor supercycle have not changed despite the current oil price fears, and major AI firms continue to show solid capital expenditure trends. Additionally, governmental measures aimed at enhancing the capital market and addressing the Korea discount are progressing steadily, providing a framework for potential recovery once external uncertainties are resolved.