Expectations for the reopening of the Strait of Hormuz have lowered international oil prices, raising hopes for a reduction in cost burdens for the Korean stock market. Pictured is the Strait of Hormuz. [Photo = Yonhap News]The theme for this week's market movement is "Deconstruction of Risk Premium."

The US stock market began the week with a Memorial Day holiday, but global market prices did not rest. The first factor to move the market was Middle Eastern risk. 

As expectations for progress in negotiations between the US and Iran spread, the risk premium surrounding the Strait of Hormuz decreased, and international oil prices rapidly declined. West Texas Intermediate (WTI), a US crude oil benchmark, fell from the $96 per barrel range at the start of the week to the $88 per barrel range by the end of the week.

This week's Money Radar has one question:

Can the decline in oil prices and stability in interest rates lead to a relief rally in the Korean stock market?

Market prices have, for now, reflected that possibility. The US 10-year Treasury yield fell from 4.56% to 4.45%, and the dollar/won exchange rate dropped from the 1511 won range to the 1493 won range. 

The combination of falling oil prices, declining interest rates, and a strengthening won is favorable for the Korean stock market. 

Korea is a market that imports crude oil and exports semiconductors, automobiles, ships, and chemical products. 

A reduction in the oil price burden eases cost pressures, and stable interest rates lessen the valuation burden for growth and technology stocks. A stronger won increases the possibility of foreign capital returning. 

Three structural changes were confirmed in this week's market.

First, the decline in oil prices signals a reduction in cost burdens for the Korean market. 

While the Strait of Hormuz risk has not completely disappeared, even a partial removal of war premiums provides breathing room for Korean manufacturing.  

Industries sensitive to energy costs, such as airlines, transportation, and chemicals, are direct beneficiaries of falling oil prices. Conversely, for the refining and energy sectors, falling oil prices could lead to concerns about short-term profitability.

Second, stable interest rates provide a foundation for a rebound in tech stocks. 

In the latter half of the week, US stocks saw renewed strength in companies related to Artificial Intelligence (AI) infrastructure. 

Following the surge in US memory chip company Micron Technology, the rally spread to US cloud data platform company Snowflake, US semiconductor company AMD, and UK semiconductor design company Arm. 

What is important for Korean readers is not the fluctuations of US tech stocks themselves, but what expectations these trends generate for large Korean semiconductor stocks like Samsung Electronics and SK Hynix.

Third, a stronger won is the gateway for foreign capital inflows. 

The dollar/won exchange rate falling below 1500 won is more than just a numerical change. From the perspective of foreign investors, it means reduced exchange rate loss burdens and improved accessibility to Korean assets. 

However, for a sustained strengthening of the won, three conditions must be met simultaneously: stable oil prices, a weaker dollar, and net purchases by foreign investors.

The US-Iran negotiations, driven by reports of a provisional agreement on a 60-day ceasefire extension and the resumption of nuclear talks, lowered market risk premiums. 

However, the final approval process by US President Trump remains, and the details regarding the method of opening the Strait of Hormuz and the scope of sanctions relief differ between the two sides. 

Therefore, this week's decline in oil prices should be viewed not as a result of a "confirmed agreement" but rather as a reflection of "expectations for progress in negotiations" being priced in first.

This week's Money Radar conclusion is clear.

The Korean stock market has not just followed the US market; it has reached a starting point for re-evaluation expectations, with favorable shifts in oil prices, interest rates, and exchange rates occurring simultaneously. 

However, for this trend to solidify into a sustained momentum, stable oil prices, a stronger won, and net spot purchases by foreign investors must be confirmed together.

Next week's key points to watch are threefold:

First, we need to confirm whether reports of progress in US-Iran negotiations will actually lead to stabilization of the Strait of Hormuz. 

Second, we need to see if the dollar/won exchange rate stabilizes below 1500 won. 

Third, we need to examine how the decline in oil prices translates into supply and demand for airlines, chemicals, transportation, and semiconductors in the Korean stock market.

※This article is for reference analysis to aid in understanding the content and is not investment advice. Actual market conditions and stock prices may vary depending on oil prices, exchange rates, interest rates, supply and demand, and policy variables.