Today, we are summarizing economic news in Economic On. The geopolitical risks surrounding the Middle East have intensified as Iran conducts airstrikes against Israel. We will examine the impact of this situation on the financial markets with reporter Hong Ki. Hong Kyung-pyo is here with us. Hello.

Hello. 

Iran had warned of retaliation after Israel assassinated the leader of Hamas, and they have now taken action. 

That's right. This morning, Iran launched a large-scale ballistic missile attack targeting Israel. 

It's been about five months since they carried out airstrikes on Israeli territory using missiles and drones back in April. Israel has warned of Iran's retaliation, and tensions are escalating in the region, raising the risk of war in the Middle East. 

The Iranian Revolutionary Guard issued a statement saying that they targeted key military and security facilities in the heart of Israel.

The Israeli military announced that Iran launched 180 missiles, while Iran claimed to have fired a total of 200. The Revolutionary Guards stated that Israeli military bases were targeted and claimed that 90% of the missiles successfully hit their intended targets. They described the missile launch as retaliation for the deaths of Hamas leader Ismail Haniyeh, Hezbollah leader Hassan Nasrallah, and the deputy commander of the Revolutionary Guards' operations. All of these individuals were reportedly killed in Israeli attacks. The Revolutionary Guards warned that if Israel responds to these operations, it will face overwhelming attacks. Furthermore, the broadcast mentioned that Iran's hypersonic missile, known as Fateh, was used in this assault.

At the end of July, after Hani's assassination in his own country, a strong retaliation against Israel was announced. However, as Israel's offensive intensified over the following two months, today we finally saw the execution of that retaliation. Approximately 180 to nearly 200 missiles were launched. So, what has been reported regarding the damage on the Israeli side? Iran has now launched about 180 to 200 missiles at Israel, but so far, it has been assessed that there have been no significant damages. It appears that Israel's missile defense system, the Iron Dome, has once again demonstrated its effectiveness. Israel and the United States intercepted a considerable number of missiles, but some strikes have been confirmed in central and southern Israel. As I mentioned earlier, this is about 90%.

There have been claims that they successfully struck, but based on the current announcements from the United States and Israel, it seems that there are not many direct casualties or significant damage. Additionally, the damage to Israeli aircraft or strategic military assets has not yet been assessed. Israeli authorities confirmed that two people were injured in the airstrikes near Tel Aviv, and it has been reported that a few others received treatment for minor injuries. 

In a village in the Palestinian territories, it was reported that a man died from missile fragments, and about four others were injured. Another important point is the response from the United States, Israel's ally. The U.S. is actively intercepting Iran's large-scale ballistic missile attacks aimed at Israel, reinforcing its commitment to Israel's defense.

It can be said that this is a protective stance. The United States has taken Israel's side while establishing a justification to prevent the possibility of an escalation into a full-scale war with Hezbollah across the Middle East. This time, the U.S. has clearly stated its position. When Iran launched a ballistic missile, the U.S. did not leave Israel's air defense to fend for itself but actively engaged in guerrilla operations. According to U.S. officials, a U.S. destroyer operating in the eastern Mediterranean fired 12 precision missiles, some of which reportedly successfully intercepted Iranian missiles. In this way, the U.S. has showcased its close security alliance with Israel, and attention is now focused on how the U.S. will respond to Iran in terms of sanctions and measures. The U.S. has been asserting Israel's right to defend itself while launching attacks against Iran.

There are warnings that serious consequences will follow, and it is expected that they will basically align with Israel. President Biden stated that the attacks seem to have intensified but are not yielding results. Regarding countering Iran, he mentioned that discussions are currently active, and we should keep an eye on the developments. National Security Advisor Jake Sullivan also stated that they will consult with Israel on the next steps in response to Iran's actions. On the Israeli side, they have made it clear that they intend to retaliate immediately. Indeed, Prime Minister Benjamin Netanyahu has expressed his intention to retaliate against Iran for its missile attacks on Israel. He stated that Iran is making a big mistake tonight and will face consequences.

The Israeli Prime Minister stated that Iran's offensive has failed to cause damage to the country. He sent a congratulatory message to his military and expressed gratitude to the United States. The Prime Minister emphasized that they will adhere to the principle of attacking anyone who attacks them, stating that this applies anywhere they fight against the forces of evil. The Israeli Defense Minister also announced that they would retaliate against the attacks, which has led to growing interest in how Israel will proceed in the future. In reality, if Israel retaliates, there are warnings that Iran may launch further attacks. As mentioned, Israel is currently in a situation where they have announced a counterattack. If the government does not respond to missile attacks on its territory, it may lead to a restraint on further attacks.

The position has been clarified. Yes, they launched missiles, but they want to keep it at this level, showing a certain atmosphere. The foreign minister claimed that the large-scale missile attack targeting Israel is an exercise of their right to self-defense. He stated that if Israel does not make any further decisions regarding retaliation, Iran's actions will cease. The Iranian Revolutionary Guard emphasized that this missile attack came after a brief period of restraint following an attack on Iran's sovereignty. However, the Iranian military shares the same stance, warning that if Israel retaliates, they will carry out a devastating counterattack. Israel has also declared its intention to retaliate, so it seems that tensions remain high. In the future, Israel...

We need to pay attention to how Iran will respond to the extent of retaliation. Yes, there is a renewed sense of tension in the Middle East, but how much has it impacted the financial markets? The recent conflict between Israel and Iran has caused stock prices to fall, leading to fluctuations in the securities market. Investors are concerned that, similar to past geopolitical tensions such as Russia's invasion of Ukraine, there will be a rush towards safe assets like U.S. Treasury bonds and the dollar, resulting in instability in the market. 

In the New York stock market, the Dow Jones Industrial Average fell by about 0.41% compared to the previous day, the S&P 500 index decreased by 0.93%, and the Nasdaq index dropped by 1.53%. The Dow and S&P 500 indices had set new all-time highs in the previous trading day, indicating a continued upward trend, but...

Unexpectedly, tensions have escalated in the Middle East, leading to concerns about a sharp rise in oil prices due to potential supply disruptions. As a result, we have seen a downward trend in the markets. Safe-haven assets, such as U.S. Treasury bonds, have seen an increase in prices. The Chicago Board Options Exchange's volatility index, known as Wall Street's fear gauge, surged by more than 15% compared to the previous day. If the Middle East crisis escalates, it is inevitable that oil supply will be affected. 

Indeed, at the New York Mercantile Exchange, the November WTI futures rose by 2.44%, closing at $69.83 per barrel, while Brent crude for December delivery jumped by 2.59%, finishing at $73.50 per barrel. Investors are viewing the expansion of this conflict as increasing supply risks in the Middle East, a region that produces about 13% of the world's oil.

The world's ninth-largest oil producer, Iran, has now directly intervened, increasing concerns about oil supply disruptions. Recently, as inflation has been easing in various countries around the globe, there have been movements toward loosening monetary policy. However, with crude oil prices rising again, market instability may increase, leading to worries that a shift in monetary policy could be difficult. This is also because prices could rise again. 

Additionally, Bitcoin, the cryptocurrency, has seen a significant drop as investors flock to safe-haven assets, experiencing its largest decline in a month. On this day, Bitcoin fell below the $60,000 mark, dropping over 5%, marking the largest single-day drop since June 6 of last month. The price of gold, which is recognized as a safe asset, has also shown an upward trend in the international financial markets.

Now, with the weakness in risky assets and the strength in safe assets, how was the atmosphere in the domestic stock market today? The KOSPI fell over 1% due to the Middle East crisis and the weakness in major semiconductor stocks, but it managed to reduce some of its losses before ultimately closing down by more than 1%. The KOSDAQ also dropped over 1% in the early trading but saw a slight reduction in its losses. As anxiety from the Middle East increased, the preference for safe assets grew, causing the exchange rate to rise, trading around 130 won. Additionally, government bond futures showed strength due to the safe-haven sentiment stemming from the Middle East crisis. The domestic stock market seemed to attempt a rebound during trading hours, influenced by China, but ultimately could not overcome the adverse factors. Looking ahead, with Israel preparing for a counterattack, the market atmosphere will be significantly influenced by this situation.

It will be a variable. Yes, the response of Israel to the recent attacks and whether the conflicts between the two countries will escalate are factors that investors believe will influence market movements in the future. For now, Israel has been targeted by missile attacks but has not directly struck Iran. However, attacks on Hezbollah and Hamas are ongoing even at this moment. They have targeted areas in Beirut, Lebanon, and the Gaza Strip. Additionally, there are reports that the Houthi rebels have fired rockets at Israeli military positions. This indicates that attacks from Islamic forces against Israel are continuing. Depending on how Israel responds to Iran, the market impact is expected to vary. In April of this year, Iran also launched missiles toward Israel.

There was a conflict, and at that time, Israel responded with airstrikes, but the dispute did not escalate. So it calmed down a bit. However, during that time, stocks and other risk assets plummeted. As the conflict did not expand and concerns about global economic turmoil subsided, the market showed signs of rebounding. But whether that will happen again this time remains to be seen. If expectations fade and Israel carries out large-scale strikes against Iran, that scenario could become a reality, and market turmoil is expected to be inevitable. Moreover, Israel, which is greatly concerned about Iran's possession of nuclear weapons, may seize this opportunity to attack Iranian nuclear facilities. If they do indeed strike those facilities, it seems difficult to avoid an escalation of the war. Alright, I understand. The situation in the Middle East is...

I will continue to keep you updated on how things are progressing. Now, let's move on to the next news. In September, the inflation rate slowed to the 1% range for the first time in three and a half years. The minimum price surged, causing the inflation rate to reach 2% in the first half of the year, but it has now dropped to the 1% range. The consumer price inflation rate has decreased, falling to the 1% range for the first time in three years and six months. The decline in oil prices, which have fallen for the first time in seven months, contributed to lowering overall prices. The consumer price index for September was 114.6, which is a 1.6% increase compared to the same month last year. The consumer inflation rate has dropped to the 1% range for the first time since March 2021, marking the lowest level since February 2021. After recording a 2.9% increase in April this year, the inflation rate entered the 2% range, and in August, it decreased to the 2% range, and now it has fallen further into the 1% range.

The prices of petroleum products have decreased, which has led to a drop in overall prices. The prices of petroleum products fell by 7.6% compared to the same month last year, marking the first decline since February of this year, resulting in a 0.32 percentage point reduction in overall prices. The stabilization of oil prices in the Middle East was influenced by the decision of OPEC countries to halt production cuts. Meanwhile, the previously noticeable rise in fruit prices has now somewhat stabilized. Agricultural product prices increased by 3.3%, contributing a 0.14 percentage point increase to overall prices. Although fruit prices, which had risen significantly in the first half of this year, have somewhat stabilized, vegetable prices have surged. The price of cabbage rose by about 54%, radishes by 42%, and lettuce by 32%, leading to an overall increase in minimum prices of 11.5%. The rate of increase in vegetable prices has been noticeable since June.

Until August, the situation was negative, but with the ongoing heatwave, there has been a significant increase. The government has announced plans to stabilize the supply of cabbage ahead of the kimjang season by expanding early shipments and imports. Additionally, they decided to extend the tariff quota measures for cabbage and radishes, which were set to end at the end of this month, until the end of the year. The Ministry of Economy and Finance also projected that if there are no external shocks, such as unusual weather or fluctuations in oil prices, the inflation rate is expected to remain stable at around 2%. Alright, let's wrap up today's news points here. Thank you for listening.

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