South Korean financial markets experienced severe turbulence as escalating tensions involving Iran sent stocks plummeting 12% and pushed the won to its weakest level in 17 years.

The broad market selloff hit South Korean equities particularly hard compared to other regional markets, wiping out significant gains that had made the country's stocks among the world's best performers earlier in the year. The sharp decline triggered panic among retail investors who had driven much of the previous rally.

The won's decline to a 17-year low against major currencies reflected broader investor flight from riskier assets amid the geopolitical uncertainty. Currency weakness added pressure on an economy already grappling with external headwinds.

South Korea's semiconductor industry expressed concerns that the Iran crisis could disrupt plans for data center developments in the Middle East region. The technology sector, which forms a crucial part of the country's export-driven economy, faces potential complications as regional tensions escalate.

The market volatility underscored South Korea's sensitivity to geopolitical developments, particularly those affecting energy markets and regional stability. Investors moved toward safer assets as uncertainty over the conflict's duration and scope weighed on risk appetite across Asian markets.