Oil prices surge on Middle East tensions…Wall Street’s three major indexes fall [Morning Briefing]

◆ Middle East tensions persist; oil prices spike…Wall Street falls again

As instability in the Middle East spread and global oil prices rose, all three major U.S. stock indexes in New York fell on the 5th (local time). In the New York stock market that day, the Dow Jones Industrial Average closed at 47,954.74, down 784.67 points (1.61%) from the previous session. The S&P 500 fell 38.79 points (0.56%) to 6,830.71, while the tech-heavy Nasdaq ended down 58.498 points (0.26%) at 22,748.986.

After closing higher the previous day on the back of steadier oil prices, Wall Street turned lower as oil rebounded sharply. On the New York Mercantile Exchange, April-delivery West Texas Intermediate (WTI) crude jumped 8.51% to settle at $81.01 a barrel—its highest level in 1 year and 8 months since July 2024. With the Strait of Hormuz effectively blocked, many oil tankers are stranded in Gulf waters (the Persian Gulf). This is also causing disruptions to crude output in Middle Eastern producers. Supply concerns eased somewhat after the Donald Trump administration said it would provide insurance and U.S. Navy escorts for ships passing through the Strait of Hormuz, but anxiety over crude supply remains.

◆ Trump: “Khamenei’s son is unacceptable…support the Kurds’ record of attacking Iran”

U.S. President Donald Trump on the 5th (local time) claimed he should be involved in succession arrangements after Ayatollah Seyyed Ali Khamenei, Iran’s supreme leader, was killed in U.S.-Israeli airstrikes. In a phone interview with U.S. online outlet Axios reported that day, Trump said, “I have to be involved in that appointment like I did with Delcy in Venezuela.” He was referring to Delcy Rodríguez, Venezuela’s interim president; she had been vice president when President Nicolás Maduro was ousted by the U.S. military. Trump praised interim President Rodríguez for boosting oil output and releasing political prisoners, adding that “Venezuela was really incredible,” and said U.S.-Venezuela relations were in excellent shape—effectively recognizing her as the figure to lead a transitional government.

On talk that Iran may install Khamenei’s second son Mojtaba as successor, Trump said “they’re wasting their time,” adding that “Khamenei’s son is lightweight.” He stressed, “Khamenei’s son is unacceptable to me. We want someone who will bring harmony and peace to Iran.” He warned that if Iran appoints a leader who continues Khamenei’s line, the United States would have no choice but to go to war with Iran again “within five years.” In an interview with Politico as well, Trump said of Khamenei’s second son, “The reason the father didn’t hand the seat to the son is because he’s considered incompetent.” He added, “We will work with the Iranian people and the regime to ensure someone who can build Iran well without nuclear weapons takes that position.”

◆ Trump ousts Homeland Security secretary amid “ICE controversy”…first Cabinet change of his second term

U.S. President Donald Trump abruptly dismissed Homeland Security Secretary Kristi Noem on the 5th (local time). It marked the first time Trump has replaced a sitting Cabinet member since launching his second-term administration in January last year. In a post on Truth Social, Trump announced the move, saying, “Kristi Noem has done a great job and achieved many incredible results—especially at the border.” He said Noem would “move to become special envoy for a new Western Hemisphere security initiative, ‘The Shield of the Americas,’ to be announced Saturday in Doral, Florida.”

The background to the personnel move is said to include a case earlier this year in Minnesota in which two U.S. citizens were killed by gunfire from agents of Immigration and Customs Enforcement (ICE), an agency under DHS, as well as recent controversy over DHS’s “luxury private jet” and “big-budget advertising campaign.” After the Minnesota incident, Noem immediately labeled the dead as “domestic terrorists,” drawing intense public backlash, which became a political burden for Trump, who has appointment and dismissal authority. Also controversial was a contract signed last October by the U.S. Coast Guard under DHS to purchase two Gulfstream G700 jets for $172 million (about KRW 250 billion). With the United States conducting a large-scale military strike operation against Iran dubbed “Epic Fury,” and the risk of a surprise terrorist attack by Iran rising, replacing the head of the department responsible for homeland security is seen as unusual.

◆ Brokerage outages including MTS amid sharp swings…FSS: “Reviewing the cause”

As Middle East-driven market volatility intensified, brokerages have seen a string of IT disruptions, prompting financial authorities to begin checks. According to the financial investment industry and regulators on the 6th, the Financial Supervisory Service (FSS) is identifying the cause after a service disruption occurred the previous morning in parts of Korea Investment & Securities’ mobile trading system (MTS), affecting account balance inquiries. An FSS official said, “We understand there was an error in balance inquiries on Korea Investment & Securities’ MTS, and we are looking into the cause and related factors,” adding, “After confirming the cause, we will prepare measures to prevent recurrence and review whether additional action is needed.” Reports of system incidents are also believed to have increased as trading volume surged in a “roller-coaster market.” The official said, “While not the same type as Korea Investment & Securities, we have received some reports of brokerage IT-related incidents,” adding, “It also appears the rise in recent trading volume has contributed to more reports.” Even on the day the KOSPI posted its largest-ever plunge, service errors occurred at some brokerages including Mirae Asset Securities and Kakao Pay Securities.

◆ Rain and snow nationwide through the morning…fine dust “Bad”

Rain or snow will fall nationwide through Friday the 6th morning. In the Seoul metropolitan area and elsewhere, fine dust levels are expected to be “Bad.” The Korea Meteorological Administration forecast that most of the rain or snow falling nationwide will stop in the morning. In the central region and North Jeolla Province, there may be occasional rain or snow from afternoon into night. In northern North Gyeongsang Province and the Jeonnam region in the afternoon, and in inland northwestern South Gyeongsang in the late afternoon, there may be raindrops of less than 0.1 mm or flurries of less than 0.1 cm. In areas with rain or snow, visibility may be reduced and roads may be slippery. In colder areas, black ice may form, requiring caution for traffic safety. In northeastern Gyeonggi and the inland and mountainous areas of Gangwon, heavy snow of 1–3 cm per hour is expected through dawn. Temperatures will remain higher than average through the morning, but from the afternoon will be near or slightly below average. Morning lows are expected at -2 to 9°C, with daytime highs of 4 to 13°C. Fine dust is expected to be “Bad” in the Seoul metropolitan area and “Moderate” elsewhere. However, Gangwon Yeongseo and the Chungcheong region are forecast to turn “Bad” in the afternoon, while Honam, Yeongnam and Jeju are expected to be “Bad” from late afternoon.

Kim Ye-rang, Hankyung.com reporter yesrang@hankyung.com