"If international oil prices rise further, the value of Asian currencies such as the won may fall"

"Korean won and baht, with heavy investor long positions, may decline"

Asian stocks and Asian currencies show simultaneous weakness

Following the U.S. airstrike on Iran, international oil prices surged, causing currencies and stocks in Asia that rely heavily on Middle Eastern oil imports to decline. In particular, the Korean won, which had recently seen significant long (holding) positions from global investors, is expected to be highly likely to fall depending on developments in the Middle East.

According to foreign media such as Bloomberg on the 23rd (local time), Brent Crude, the global benchmark, recorded $77.75 per barrel at 10 a.m. London time, up 0.9%, but at one point during the session, it soared as much as 5.7% to $81.40 per barrel.

Ahead of this, the MSCI Asia-Pacific Index, excluding Japan, fell 1.1%. The MSCI Emerging Markets Index dropped 0.8%, with Taiwan's TSMC and Samsung Electronics accounting for two-thirds of the decline.

Japan's Nikkei 225, limited by news that the June manufacturing activity index turned positive for the first time in a year, closed down 0.13% at 38,354.09 points. Korea's KOSPI ended 0.24% lower at 3,014 points.

The Taiwan stock market recorded the largest drop. Only the Shanghai Composite Index in China and the Hang Seng Index in Hong Kong showed gains.

While most Asian stock markets, except China, fell, Asian currencies also weakened across the board.

The Japanese yen, usually considered a safe-haven asset, plunged 1.2% against the dollar to ¥147.79 per dollar.

The Korean won led the decline that day, contributing to a 0.3% drop in the Asian Dollar Index. The KRW-USD exchange rate in Seoul's forex market jumped ₩18.7 to ₩1,384.3 in one day, meaning the won's value plummeted 1.35% in a single session.

The Indonesian rupiah also plummeted, prompting Bank Indonesia to intervene in the market to curb further declines.

The U.S. attack on Iran by President Trump raised concerns over disruptions to Middle Eastern energy supply, a major blow to Asian countries as most are importers of oil.

Fiona Lim, chief currency strategist at Malayan Banking Berhad, said, "If Brent Crude approaches $80 per barrel, pro-cyclical Asian currencies—especially those from net importers—will be most affected."

According to calculations by Bloomberg, the 30-day correlation between Brent Crude futures and the Asian Dollar Spot Index is now -0.45, the most negative reading since March 2022. The closer this value gets to -1, the more Asian currencies move inversely in proportion to Brent Crude futures prices.

Wells Fargo particularly predicted that India's rupee, the Korean won, Thailand's baht, and the Philippine peso would suffer the hardest blow.

Chidu Narayanan, head of Asia-Pacific macro strategy at Wells Fargo, noted, "Currently, most long positions are concentrated in the won, followed by the baht." He therefore said these currencies could see larger short-term drops.

Robin Brooks, senior fellow with the Global Economy and Development Program at the Brookings Institution, stated in a report that up until President Trump announced an airstrike against Iran, "global investors continued pouring into emerging markets." However, he warned, "With the risk of a sharp reversal in capital flows following the U.S. airstrike on Iran, emerging market currencies could see a steep depreciation."

That day, as the likelihood of Iran blocking the Strait of Hormuz was assessed to be low, the U.S. dollar and U.S. stock futures rose. As of 5:30 a.m. Eastern Standard Time, S&P 500 futures were up 0.2%, NASDAQ futures 0.3%, and Dow Jones futures 0.1%, respectively.

Contributed by Jungah Kim, guest reporter kja@hankyung.com