As the Middle East war drags into its second month, the South Korean stock market is undergoing a dramatic reshuffling, with defense stocks surging and traditional export giants like automobiles and shipbuilders stumbling. New data from the Korea Exchange, reviewed by Yonhap News and Etoday, shows just how much the conflict’s ripple effects have transformed market dynamics, investor behavior, and even corporate social responsibility efforts across the nation.
On March 27, 2026, Samsung Electronics and SK Hynix maintained their long-held positions as the top two companies by market capitalization. But the real story lies just below the surface. Hanwha Aerospace, a leading defense contractor, leapt from 10th to 7th place in the rankings within a single month, its market cap swelling by 11.7%—from 61.6 trillion KRW to 68.8 trillion KRW—according to Munhwa Ilbo. KB Financial Group also climbed, rising from 12th to 10th. In contrast, automotive and shipbuilding stalwarts like Kia and HD Hyundai Heavy Industries each slid two spots, now at 9th and 11th respectively, with their market values shrinking by 24.2% and 17.3%.
Hyundai Motor, while holding on to its third-place ranking, endured a bruising 26.6% plunge in market capitalization, dropping from 138 trillion KRW to 101 trillion KRW. The company’s stock price fell from 674,000 KRW to 495,000 KRW over the month. HD Hyundai Heavy Industries saw its own stock price fall 17.3%. The main culprits? Skyrocketing oil prices, a surging won-dollar exchange rate, and mounting supply chain uncertainties—especially fears over naphtha shortages disrupting ethylene production, as reported by Etoday and Munhwa Ilbo.
This divergence between sectors is stark. Defense companies, buoyed by global security anxieties and rising orders, have emerged as the clear winners. Hanwha Aerospace’s 11.7% gain was accompanied by even stronger showings from LIG Nex1 (up 44.4%) and Hanwha Systems (up 9.2%) during the same period. These gains are “a result of increased expectations for K-defense exports, a global trend toward higher defense budgets, and escalating geopolitical risks,” explained DB Securities analyst Seo Jae-ho to Yonhap News. He added, “This year, Korean defense companies are expected to achieve record export sales of about 37.7 billion USD, or roughly 56.6 trillion KRW.”
Meanwhile, the KOSDAQ market is witnessing its own shakeup. Samchundang Pharmaceutical, which started the year outside the top 10, surged to the number one spot by March 27. The catalyst? The company’s March 19 announcement that it had submitted a plan for phase 1/2 clinical trials of its oral insulin in Europe, a move that electrified investor sentiment and sent its shares soaring.
But it’s not just the corporate rankings that are shifting. The war has triggered an unprecedented tug-of-war between foreign and domestic investors. According to Yonhap News, from March 3 to March 27, foreign investors dumped a record 30.3 trillion KRW worth of Korean stocks, selling nearly every day except for three. Since the start of 2026, their net selling has totaled over 51.3 trillion KRW. The main targets? High-liquidity, high-index-contribution stocks like semiconductors and automobiles—think Samsung Electronics and Hyundai Motor.
In stark contrast, Korean individual investors saw the market volatility as a golden opportunity. They snapped up 30.7 trillion KRW in shares during the same period, also a record, and have accumulated 34.3 trillion KRW in net purchases since January. Their top pick was Samsung Electronics, where they bought 16.8 trillion KRW worth of shares, even as foreigners sold off a nearly identical amount. As a result, foreign ownership in Samsung Electronics dropped below 50% for the first time in recent memory, settling at 48.9% on March 27.
The divergence in buying patterns is striking. While foreign investors’ top net buy was Hanwha Aerospace (2.33 trillion KRW), their biggest net sell was Samsung Electronics (15.5 trillion KRW). For individuals, Samsung Electronics was the top buy (15.2 trillion KRW), while Hanwha Aerospace was the top sell (3.2 trillion KRW). This pattern reflects deep-seated differences in risk perception. As explained by SK Securities analyst Kang Dae-seung, “Foreigners still see Korean stocks as risky assets, especially in wartime. Rising oil prices and exchange rates, plus Korea’s reliance on Middle East oil, are accelerating their exit.” In contrast, he notes, “Individuals are using the volatility as a buying opportunity, and their support has helped prevent further declines.”
Indeed, the KOSPI index dropped 12.55% through March 26—the steepest fall among major global indices—but would likely have fallen further without the robust buying from retail investors, according to Yonhap News.
Beyond the numbers, the defense industry’s newfound prosperity is manifesting in other ways. In 2025, the so-called “big four” defense companies—Hanwha Aerospace, Hyundai Rotem, Korea Aerospace Industries (KAI), and LIG Nex1—collectively donated 50.7 billion KRW, nearly doubling the previous year’s total, Youth Daily reports. Hanwha Aerospace alone contributed nearly 40 billion KRW, while Hyundai Rotem’s donations jumped 78.2% to 2.11 billion KRW. LIG Nex1’s giving surged almost fourfold, fueled by lucrative exports of its Cheongung II multi-launch rocket system to the UAE. These funds are primarily used for soldier welfare and housing improvements for veterans, and the industry expects this upward trend in donations to continue as exports expand to new markets like Poland, Latin America, and Southeast Asia.
Industry insiders see this as part of a broader shift toward ESG (environmental, social, and governance) management. “It’s not just about growth in numbers,” one defense executive told Youth Daily. “We want to create social value and be leaders in sustainable business practices.”
Yet, uncertainty hangs over the market. While defense stocks soar, questions linger about how deeply geopolitical risks might eventually erode corporate fundamentals, especially if disruptions in oil and raw material supplies persist. As Shinhan Investment analyst Noh Dong-gil put it in Yonhap News, “The key issue is whether these shocks will spill over into real, lasting damage to company performance.”
For now, the Korean stock market stands at a crossroads, its fate intertwined with the shifting tides of global conflict, investor sentiment, and the resilience of its leading industries. The coming months will reveal whether the current winners can sustain their momentum—and whether the market as a whole can weather the storm.