South Korea’s financial markets have been shaken by political uncertainty following President Yoon Suk Yeol's brief declaration of martial law, sending the local currency and stock prices into a tailspin.

The Korean won opened at 1,418.1 against the US dollar on December 4, marking a significant drop of KRW15.2 from the previous session. The currency briefly plunged below the KRW1,440 threshold during offshore trading, its lowest level since October 2022, as investors reacted to the president’s surprise move, as reported by Yonhap.

President Yoon declared “emergency martial law” late on December 3, accusing the opposition Democratic Party of South Korea (DPK) of paralysing the government with “anti-state activities” and sympathising with North Korea. The dramatic decree, which saw military troops surrounding the National Assembly, raised fears of a return to authoritarian rule. However, after only six hours, the National Assembly swiftly voted to revoke martial law, prompting the president to backtrack and order the withdrawal of military forces.

The nation remains on edge with many now waiting to see if impeachment efforts are successful or if the president opts to resign in the meantime.

Despite the resolution of the immediate crisis, the damage to market sentiment was evident. The benchmark Korea Composite Stock Price Index (KOSPI) opened lower, dropping 25.95 points, or 1.04%, to 2,474.15 in the first 15 minutes of trading on December 4. Large-cap stocks bore the brunt of the sell-off, with Samsung Electronics dropping 1.3%, SK hynix shedding 0.55%, and Hyundai Motor falling 1.86%. Notably, battery makers suffered steep declines, with LG Energy Solution down 2.14% and Samsung SDI losing 2.68%.

The unrest has spurred further uncertainty, with the Korean Confederation of Trade Unions (KCTU) announcing plans for an indefinite strike until President Yoon steps down. The KCTU condemned the martial law declaration as a violation of democratic principles and pledged to lead protests against the administration. These protests, alongside ongoing labour strikes, have exacerbated the nation’s political instability.

As markets continue to react, the local currency traded at KRW1,409.5 per dollar at 9:15 a.m., down by KRW6.6 from the previous session. The volatility has raised questions about South Korea’s political future and its economic resilience in the face of such dramatic political shifts.

With further protests likely, the country is bracing for a prolonged period of uncertainty.