South Korea and Japan Stock Markets Plunge
Since the end of February 2026, Asian stock markets, represented by South Korea and Japan, have experienced a sharp correction. The South Korean stock market fell from 6,307 points on February 27 to 5,252 points on March 9, a decline of about 17%, while the Japanese stock market dropped from 58,850 points on February 27 to 52,729 points on March 9, a decrease of about 10% (see Figures 1 and 2).
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OaQtGWUFLP8BVDPbPr64Me-9nv0BxkIrQ3luqThn2kmM8AA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OaQtGWUFLP8BVDPbPr64Me-9nv0BxkIrQ3luqThn2kmM8AA/641"/><img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OQLs6Nl_G1AnVszVDBVfC41yY9GiIBNegib5D9bmWtsAoAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OQLs6Nl_G1AnVszVDBVfC41yY9GiIBNegib5D9bmWtsAoAA/641"/>
The recent decline in the South Korean and Japanese stock markets is not due to a single factor, but rather the result of multiple pressures.
● Energy Supply Crisis Triggered by Geopolitical Conflicts
Currently, the direct trigger for the turmoil in global markets is the escalation of geopolitical tensions in the Middle East. As concerns over disruptions to shipping in the Strait of Hormuz intensified, international oil prices surged, with WTI crude oil briefly exceeding $110 per barrel.
As a resource-poor country, South Korea's energy security is extremely vulnerable. Approximately 70% of its crude oil imports and nearly 30% of its liquefied natural gas imports depend on the Middle East. The spike in oil prices has directly worsened South Korea's trade conditions and triggered imported inflation. Citibank predicts that if oil prices remain high, South Korea's GDP growth rate may decline by 0.45 percentage points.
Japan also heavily relies on Middle Eastern energy, with over 90% of its crude oil imports coming from the region. The rising energy costs pose a direct threat to Japan's import-dependent manufacturing sector, exacerbating market concerns about corporate profitability.
● Market Vulnerability Due to Previous Excessive Gains
Before the geopolitical conflicts, both the South Korean and Japanese stock markets had accumulated significant profit-taking pressure, leading to inherent correction risks.
Driven by the AI wave and the semiconductor cycle, the South Korean stock market surged over 60% throughout 2025, and in early 2026, it skyrocketed, with the index rising 48% from January 2 to February 27, breaking through the 6,000-point mark. This rapid increase made it susceptible to a sell-off at the slightest disturbance (see Figure 3).
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OJn8YBcivDFEUP3JLd_I1sMEHN8v_B36X5TVM2Ljr-GjMAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/OJn8YBcivDFEUP3JLd_I1sMEHN8v_B36X5TVM2Ljr-GjMAA/641"/>
The situation in the Japanese stock market is similar. The Nikkei 225 index rose approximately 26% in 2025 and accelerated its increase in early 2026, with the index climbing 17% from January 5 to February 27, reaching a phase of overheating (see Figure 4)
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/Ol-KWKSHeqfJcANmW5Nj-PEOLFcLexMr1Osmn7qcPwORsAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/Ol-KWKSHeqfJcANmW5Nj-PEOLFcLexMr1Osmn7qcPwORsAA/641"/>
When the &#34;black swan&#34; event of the Iran war broke out, the accumulated profits and the fragile energy structure resonated, triggering a concentrated outflow of leveraged funds, leading to a cliff-like decline in the stock markets of South Korea and Japan.
Why A-shares Have Independence
In contrast, the Chinese A-share market, in my opinion, although it is difficult to completely isolate itself from global risk aversion, faces much less pressure for a pullback than South Korea and Japan.
● A-shares Do Not Have Significant Bubbles
Unlike the South Korean and Japanese stock markets, which were at historical highs before the crash, the Chinese stock market experienced a more moderate corrective rise during the period of 2024-2025. Although the market has a positive outlook for the future, there has not been a short-term surge similar to that of the South Korean and Japanese stock markets. From January 5, 2026, to February 27, 2026, the Shanghai Composite Index only rose by 4.9% (see Figure 5). Relatively reasonable valuations provide a thicker &#34;safety cushion,&#34; thus the &#34;valuation killing&#34; pressure brought by the oil price shock is relatively small in the A-share market. Moreover, even though the stock market has recently plummeted, from the beginning of the year to March 9, the South Korean stock market still rose by 25%, the Japanese stock market rose by 5%, while the Shanghai Composite Index only rose by 3%.
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/ORnVnlBWD9wzZoJ_Ia8x-q0FsG999u9Y2-h_9L-JBgWcUAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/ORnVnlBWD9wzZoJ_Ia8x-q0FsG999u9Y2-h_9L-JBgWcUAA/641"/>
● Energy &#34;Safety Cushion&#34;
Data shows that China's overall energy self-sufficiency rate reaches 84.4%. In stark contrast, Japan's energy self-sufficiency rate is extremely low, facing serious energy security challenges. According to data from Japan's Ministry of Economy, Trade and Industry, Japan's overall energy self-sufficiency rate is only 12.6%. Japan's energy structure heavily relies on imports, particularly concerning its dependence on the Middle East. Data indicates that 95% of Japan's oil imports and 81% of its liquefied natural gas imports come from the Middle East, with about 73.7% of oil needing to be transported through the Strait of Hormuz. This highly concentrated energy import structure makes Japan's economy extremely vulnerable in the face of geopolitical conflicts.
South Korea's energy security situation is even more severe than Japan's. According to a report from the Korea Energy Economics Institute, South Korea's energy self-sufficiency rate is only about 10%. This means that about 90% of South Korea's energy needs must be met through imports, making it one of the countries with the highest dependence on foreign energy in the world.
In the face of oil price shocks, China has more diversified means of response. It can stabilize supply chains by increasing domestic procurement, import through land pipelines from Russia and Central Asia as a substitute for maritime transport, and alleviate the pressure of rising oil prices through coal and new energy alternatives. This independence in energy structure significantly weakens the transmission chain of the negative logic that &#34;the Middle East situation leads to rising oil prices&#34; in the A-share market
● Policy Space and Macroeconomic Environment
In the face of external shocks, China has a more ample policy toolbox for hedging. Recently, regulatory authorities have released clear stability signals, including the implementation of policy tools to support the development of capital markets and the role of quasi-stabilization funds. In addition, China's inflation pressure is relatively low, and monetary policy maintains independence and flexibility, allowing for continued moderate easing of monetary policy to support the real economy. In terms of economic fundamentals, it is expected that the GDP increment will exceed 6 trillion yuan by 2026, providing macro support for the profitability of listed companies.
● China May Seize This Opportunity to Gain More Competitive Advantages
China's energy security advantages may be transformed into industrial competitive advantages, mainly reflected in the following aspects:
First, the cost advantage of manufacturing is highlighted. China's energy self-sufficiency rate is as high as 84.4%. Against the backdrop of rising global energy costs, the cost advantage of Chinese manufacturing will become more prominent.
Second, the new energy industry is entering a golden development period. The surge in oil prices will accelerate the global energy transition process, and China's advantages in the new energy sector will be fully realized. China has established a complete industrial chain from upstream raw materials to downstream applications, leading the world in fields such as photovoltaics, wind power, energy storage, and new energy vehicles. It is expected that in the near future, orders for Chinese new energy companies will increase significantly, and export volumes may grow rapidly.
Third, energy technology innovation is accelerating. In the face of energy security challenges, China will increase investment in energy technology innovation. Significant breakthroughs are expected in areas such as hydrogen energy, energy storage, and smart grids. Particularly in the hydrogen energy sector, China has already formulated clear development plans, aiming to become a global leader in hydrogen energy technology and industry by 2030.
Fourth, deepening energy cooperation under the &#34;Belt and Road&#34; initiative. China will further deepen energy cooperation with co-building countries through the &#34;Belt and Road&#34; initiative. More energy projects are expected to be implemented, including oil and gas pipelines, new energy projects, and energy infrastructure construction. These cooperations will not only ensure China's energy security but also bring huge business opportunities to Chinese enterprises.
Fifth, improving the energy financial system. China will accelerate the establishment of an energy trading system priced in yuan, reducing dependence on the US dollar. More energy futures varieties are expected to be launched, enhancing China's voice in global energy pricing. At the same time, the process of RMB internationalization will also accelerate, with more countries using RMB for energy trade settlements.
The Logic of Shifting from &#34;Risk Concerns&#34; to &#34;Relative Advantages&#34;
In summary, the recent sharp decline in the South Korean and Japanese stock markets is an inevitable clearing of previous bubbles under external shocks. For the A-share market, &#34;not following&#34; is not only due to low valuations but also because China has significant comparative advantages in energy security and supply chain resilience.
From the perspective of global asset allocation, a financial market turmoil triggered by an energy crisis often prompts international capital to reassess the safety of different markets. While South Korea and Japan face &#34;stagflation&#34; risks due to their structural energy shortcomings, China's relatively robust energy security and industrial system may instead become a &#34;safe haven&#34; for attracting foreign investment
Therefore, although short-term market sentiment may be disturbed, China is expected to occupy a more favorable position in the global stock market differentiation triggered by geopolitical conflicts, thanks to its higher energy self-sufficiency and policy independence, and even further expand its advantages in the restructuring of global supply chains and industrial competition.
Author: Tong Yao
Source: Financial Review · Wealth, Issue 3, 2026
Editor: Zhang Yanhua
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Since the end of February 2026, the South Korean and Japanese stock markets have experienced significant declines, with the South Korean stock market dropping from 6,307 points to 5,252 points, a decrease of approximately 17%; the Japanese stock market fell from 58,850 points to 52,729 points, a decrease of about 10%. The reasons for the decline include the energy supply crisis triggered by geopolitical conflicts in the Middle East and the market vulnerability caused by previous excessive stock market gains. Despite these challenges, the Chinese A-share market has shown a degree of independence

Korean and Japanese stock markets plummet, where will A-shares go from here?