South Korean shares closed lower on Wednesday, snapping a two-day gaining streak as higher oil prices raised inflation concerns and pushed global bond yields higher. In addition, the U.S. and Iran's resumption of strikes, following their most intense exchange of fire in weeks, also affected sentiment.

Washington threatened further strikes, while Iran condemned a U.S. attack that it said killed five civilians at a wedding. The U.S. military said it targeted Iranian air defenses, radar, maritime assets, mine-laying capabilities and communications sites.

The Korea Composite Stock Price Index, or Kospi, decreased by 273.08 points, or 4%, to close at 6,562.72. The Kosdaq also fell by 17.27 points, or 2.1%, to close at 803.98.

In economic news, South Korea's headline inflation rate quickened to 3.1% in August from 2.8% in July, according to data from the Ministry of Data and Statistics published Wednesday.

The latest print missed the market consensus forecast of 3.2%, according to Investing.com.

On a month-over-month basis, consumer prices inched up 0.2%, reversing the 0.2% decline the previous month.

Meanwhile, the country's core inflation rate, which excludes food and energy prices, accelerated to 3.4% from 2.6% in July. Month-over-month core inflation eased to 0.2% from 0.4%.

In other economic news, South Korea plans to raise its 2027 budget by a record 12.8% to 820.9 trillion won, according to government announcements on Wednesday.

The plan, approved during a Cabinet meeting on Tuesday, is designed to establish a "growth-led fiscal virtuous cycle," the Ministry of Planning and Budget said.

The budget will draw upon 162.3 trillion won in excess tax revenues, surpassing the 10-year domestic tax trend line. Of this total, 45.4 trillion won will be funneled into youth support, growth engines, local regions, and education and talent, the ministry added.

In corporate news, Doosan Fuel Cell (KRX:336260) secured a fuel cell system supply contract from Connecticut-based energy company HyAxiom, according to a filing with the Korea Exchange on Wednesday.

The contract, valued at 501.4 billion won, is valid until April 20, 2028.

Shares of Doosan Fuel Cell fell nearly 13% at market close.