"Samsung Electronics and SK hynix down in the 4% range—did the KOSPI move first?" $100 oil bomb gives the U.S. a case for a rate hike

[Financial News] Ahead of next week's Federal Open Market Committee (FOMC) meeting, speculation is rapidly spreading that "the Fed may really raise interest rates this time."

In a report released on the 11th, IBK Securities said, "The Iran situation is worsening as clashes involving the United States and China escalate, pushing up oil prices and driving a rise in commodity prices." It added, "Caution surrounding next week's FOMC meeting is expected to intensify."
Byun Jun-ho, a researcher at IBK Securities, forecast, "Brent crude oil has surged by about 30% since the second half of the year began, breaking above $100 again. WTI has also continued to rise, stoking inflation concerns and further strengthening the case for higher market interest rates and a benchmark rate hike."
International oil prices surged 6.7% on the day, with West Texas Intermediate crude oil (WTI) settling at $102.48 a barrel. Brent crude oil also jumped more than 6%, rising above $107. Amid the sharp increase in oil prices, the yield on 10-year U.S. Treasuries climbed above 4.95% to its highest level in about three years. Yields on 30-year and two-year Treasuries also rose to their highest levels in 19 years and more than two years, respectively.

As U.S. technology stocks faltered overnight amid rising oil prices and a sharp jump in Treasury yields, Samsung Electronics and SK hynix were also trading lower on the 11th. As of 10:54 a.m., Samsung Electronics was trading at 258,250 won, down 4.18% from the previous session, while SK hynix was at 1.786 million won, down 4.1%. The KOSPI Composite Index also failed to maintain the previous day's momentum, when it had broken above 7,000. It opened at 6,802.50, down 3.29% from the previous session, and remained around the 6,800 level.
Byun explained, "The current Middle East issue is expanding beyond the risk of a blockade of the Strait of Hormuz to the risk of a blockade of the Bab-el-Mandeb Strait." He added, "As Saudi Arabia and Yemen's Iran-aligned Ansar Allah (Houthis) engage in fighting on a scale approaching all-out war over control of the entrance to the Red Sea, concerns about disruptions to Saudi oil supplies are growing." The Bab-el-Mandeb Strait accounts for 11% of global seaborne crude oil trade, less than the Strait of Hormuz's 25%, but it is a strategic chokepoint whose effects extend to Europe and North America.
The problem is that this situation could drag on. Byun pointed out, "Iran may continue prolonging the issue in a way that disadvantages the Republican Party in the midterm elections, while Trump has also said that he will not end the war with Iran until the midterm elections or even later. Expectations for an immediate resolution are therefore not high." In fact, U.S. President Donald Trump has said that the war with Iran will not end before the midterm elections, raising concerns that the conflict could be prolonged.
Byun said, "According to the CME FedWatch Tool, the probability of a rate hike in September has risen to around 60%." He added, "Given the strong U.S. employment data for August and the recent surge in oil prices, a surprise rate hike cannot be ruled out." He also explained that even if the Fed holds rates steady next week, concerns about a hike are likely to persist because the central bank could signal the possibility of increases in the fourth quarter, in October and December.

[email protected] Kim Hee-sun Reporter