Home > Business > Finance

Korean won loses traction as Israel's aggression buoys dollar

Published: 18 Jun. 2025, 19:26 Updated: 18 Jun. 2025, 22:56

JIN MIN-JI
[email protected]

An electronic display board at Hana Bank in central Seoul shows the won trading at around 1,370 won against the dollar on Wednesday, weakening amid the escalation of geopolitical tensions in the Middle East. [YONHAP]

The Korean won weakened against the U.S. dollar on Wednesday, touching 1,380 won during trading, up 0.44 percent from a day earlier, amid fears that the United States could become more involved in the Middle East or even strike Iran directly.

The won, which strengthened to 1,350 won range following President Lee Jae Myung’s inauguration earlier this month, lost traction as geopolitical tension in the Middle East raised demand for the safe-haven dollar. It was trading at 1,369.4 when the market closed.

U.S. President Donald Trump on Tuesday demanded Tehran’s “unconditional surrender,” saying Washington’s patience was “wearing thin” as the war between Israel and Iran entered its sixth day.

Trump is weighing his military options and increasingly losing faith in the idea of a diplomatic resolution to end the conflict, CNN reported Tuesday, and has maintained that Iran cannot have a nuclear weapon.

In Truth Social posts, he claimed the United States was aware of the whereabouts of Iranian Supreme Leader Ayatollah Ali Khamenei, referring to him as an “easy target” but adding that the United States has no plans to take him out.

The dollar index, which represents the value of the U.S. dollar relative to a basket of major foreign currencies, traded above 98 after dropping below that level last week for the first time since early 2022.

The recent crude spike placed additional pressure on the Korean won, fueling concerns regarding its broader economic impact given the country’s heavy dependence on energy imports.

West Texas Intermediate (WTI) surged 4.29 percent on Tuesday, closing at $73.27 per barrel, more than $10 above its price at the beginning of the month.

WTI crossed $130 in March 2022, following the start of Russia's war against Ukraine, to reach its highest since 2008. Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries, producing approximately 3.3 million barrels per day.

The spike could trigger inflationary pressure on Korea by driving up domestic energy prices, as well as production and transportation costs, which are likely to be passed on to consumers in the form of higher prices.

Higher oil prices also mean that Korea must spend more dollars to buy oil, further weakening the won.

Despite heightened geopolitical tensions, Korea’s markets held relatively firm.

The Kospi ended the day up 0.74 percent from the previous trading session at 2,972.19 while the secondary Kosdaq climbed 0.53 percent to 779.73.

That was despite the fact that the United States market tumbled. The S&P 500 closed down 0.84 percent from the previous day on Tuesday while the Nasdaq composite fell 0.91 percent in the same period.

BY JIN MIN-JI [[email protected]]