From Strait of Hormuz to KOSPI: sectoral responses of the South Korean stock market to the 2026 Iran strikes

This paper examines how the South Korean stock market responded to the 28 February 2026 U.S.–Israel strikes on Iran, asking whether an oil-supply shock is priced mainly through Korea's status as an oil importer or through firm-level characteristics, particularly in petroleum refining and energy. Using a market-model event study of 784 firms on the Korea Composite Stock Price Index (KOSPI), we estimate abnormal returns over a 250-day window, with 200-day and 100-day windows for robustness. The event date is 3 March 2026, the first Korean trading day after the strikes. The KOSPI reacted negatively: the CAAR reached −3.75% over [0, +1] and −5.41% over [−5, +5], significant across all specifications. Sectoral heterogeneity was substantial. Consumer discretionary, consumer staples, and healthcare recorded the largest losses, consistent with weaker household purchasing power and demand. Energy firms earned positive abnormal returns, significant under parametric and marginally significant under non-parametric tests, consistent with wider refining margins and inventory revaluation gains. Cross-sectional regressions confirm that oil-sector firms outperformed, with the effect significant absent sector fixed effects and consistently positive throughout. The paper extends the geopolitical literature with a cross-sectional framework distinguishing firm-level oil-exposure effects from sector-level effects, showing how petroleum value-chain structure shapes responses to geopolitical shocks.