South Korean President Declares Emergency Martial Law, Sending Global Markets into Turmoil

South Korean President Declares Emergency Martial Law, Sending Global Markets into TurmoilOn December 3rd (local time), South Korean President Yoon Suk-yeol declared a state of "emergency martial law" amid escalating domestic political strife, triggering significant turmoil in global markets. This unexpected event led to a sharp devaluation of the South Korean won, a stock market crash, a surge in gold and oil prices, and a severe blow to the cryptocurrency market, resulting in tens of thousands of liquidations

South Korean President Declares Emergency Martial Law, Sending Global Markets into Turmoil

On December 3rd (local time), South Korean President Yoon Suk-yeol declared a state of "emergency martial law" amid escalating domestic political strife, triggering significant turmoil in global markets. This unexpected event led to a sharp devaluation of the South Korean won, a stock market crash, a surge in gold and oil prices, and a severe blow to the cryptocurrency market, resulting in tens of thousands of liquidations. This article will analyze the impact of this event on global financial markets.

South Korea's Political Crisis and the Emergency Martial Law Order

President Yoon's announcement of emergency martial law swiftly garnered global attention. CCTV News and CCTV International reported that President Yoon cited the opposition party's alleged actions of "manipulating the National Assembly and disrupting the nation" as the justification for imposing martial law and claimed he would purge "anti-national forces." While specific martial law measures haven't yet been detailed, the move has already provoked a strong political backlash within South Korea.

The main opposition party, the Democratic Party of Korea, immediately convened an emergency meeting and urged citizens to protect the National Assembly. The South Korean Minister of National Defense summoned a meeting of key commanders nationwide, while Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho called an emergency meeting on martial law. The National Police Agency commissioner and the Ministry of Foreign Affairs also held separate emergency meetings to coordinate responses. Divisions have also emerged within the ruling party, with ruling party leader Han Dong-hoon publicly opposing the president's decision and vowing to work with the people to stop it.

Currently, access to the National Assembly is blocked, preventing lawmakers from entering. A standoff between the opposition party's support group and the police is underway at the National Assembly entrances, creating a tense situation. Lee Jae-myung called on citizens to go to the National Assembly to protect it, though the public's response remains unclear. The event's further development remains highly uncertain, and its impact on South Korea's political and social stability will be profound.

Impact of the Emergency Martial Law on Financial Markets

President Yoon's declaration of emergency martial law significantly impacted global financial markets. The announcement sent the USD/KRW exchange rate soaring by over 1.5%, causing a substantial devaluation of the won. The iShares MSCI South Korea ETF saw pre-market declines of 3.1%, reflecting investor concerns about South Korea's economic outlook. Samsung Electronics, a flagship South Korean company, experienced a stock price drop exceeding 4% in London markets, further fueling market panic.

Beyond the South Korean stock market, other markets were also affected. Heightened risk aversion led to a short-term surge in gold prices, with London gold up 0.48% and COMEX gold up 0.56%. International oil prices also rose, with ICE Brent crude and NYMEX WTI crude both increasing by almost 2% intraday. This phenomenon might be attributed to escalating geopolitical risks and concerns about energy supply. It's important to note that the oil price increase is also linked to the extension of the OPEC+ production cut agreement.

OPEC+ Production Cut Extension's Impact on Oil Prices

Four OPEC+ sources revealed that OPEC+ might extend its latest round of production cuts to the end of the first quarter of next year at this week's meeting. This news provided additional support to the oil market, further boosting prices. While the original OPEC+ goal was to lift production cuts by 2025, slower global demand and rising production outside OPEC have hampered that plan.

Sources indicate the cuts could last until the first quarter, but a six-month extension is unlikely. Commerzbank research analysts believe that if OPEC+ decides to further delay the market's anticipated production increase, oil prices might react mildly. OPEC+ is expected to decide on Thursday to postpone the production increase for another three months until the end of the first quarter. However, the UAE has been granted permission to gradually increase its daily output by 300,000 barrels from January, introducing uncertainty to the oil price trajectory. Analysts believe that with one country allowed to increase production, a voluntary reduction agreement will be difficult to fully implement for another three months.

Bitcoin Continues Adjustment, Market Divergence Widens

The cryptocurrency market was also affected. Bitcoin's price continued its adjustment, falling below $95,000 after briefly approaching $100,000. Data from Coinglass shows that over 200,000 cryptocurrency market positions were liquidated in the past 24 hours, indicating widespread market panic.

Market opinions on Bitcoin's future trajectory are divided. Naeem Aslam, an analyst at Zaye Capital Markets, expressed lingering concerns about a Bitcoin consolidation phase, potentially leading to further declines before a rebound. Conversely, a senior analyst at a New York investment bank predicts Bitcoin will surge to $225,000 by the end of 2026, representing a more than 130% increase from current levels.

It's worth noting that SoSoValue data shows that in November, 12 US Bitcoin ETFs attracted a record $6.2 billion in net inflows, driven by Bitcoin's near-record high of $100,000 and investor anticipation of cryptocurrency policies under a potential Trump presidency. Analysts believe that the Securities and Exchange Commission (SEC) may further advance the launch of other crypto asset ETFs, leading to more active allocation of Bitcoin and other digital assets by corporations and retirement funds under favorable policies.

Conclusion

South Korea's President's declaration of emergency martial law has not only had a massive impact on the country's domestic political and social landscape but has also significantly affected global financial markets. The won's devaluation, stock market crash, and rise in safe-haven asset prices reflect market concerns about geopolitical risks. Rising oil prices are linked to the extension of the OPEC+ production cut agreement and geopolitical factors. The cryptocurrency market also experienced significant volatility, with Bitcoin's price dropping and numerous investor liquidations. The event's future remains uncertain, and global investors need to closely monitor developments and manage risks accordingly.