Global equity markets faced broad selling pressure on Friday, with South Korea's benchmark index leading the decline. After briefly touching a historic milestone, the KOSPI reversed sharply, plummeting nearly 5%. The sell-off was driven by heavy foreign selling, particularly in technology stocks, with net outflows exceeding $2.5 billion. Major constituents like Samsung Electronics and SK Hynix each fell over 5%, dragging the index lower. The weakness extended across Asia and Europe; Japan's Nikkei 225 dropped 1.3%, while futures for Europe's Stoxx 50 index fell 1.3%. U.S. stock index futures also extended losses, with Nasdaq futures down 0.9%.

Rising oil prices, which stoked fears of resurgent inflation, contributed to the risk-off sentiment. WTI crude futures rose 1.4% to $102.58 per barrel, and Brent crude gained 1.3% to $107.08, supported by ongoing tensions in the Strait of Hormuz. Conversely, safe-haven assets came under pressure. Spot gold fell over 1%, breaking below the $4,600 per ounce level. Spot silver dropped 4.19%, falling below $80 per ounce.

Bond yields surged globally on inflation concerns. The yield on the U.S. 10-year Treasury note rose to 4.53%, its highest level since May 2025, while the two-year yield increased 4 basis points to 4.06%. Japan's 20-year government bond yield climbed 6.5 basis points to 3.61%, a level not seen since 1996. The U.S. Dollar Index edged up 0.2%.

Market analysts pointed to shifting expectations for U.S. monetary policy as a key driver. "Markets have fully priced out the chance of a Fed rate cut this year and are now leaning toward the possibility of a hike before year-end," said Wu Dilin, a research strategist at Pepperstone Group. "With oil prices remaining persistently high, the question of how long equities can hold up in this environment is becoming more urgent."

The KOSPI's sharp reversal followed an impressive rally of approximately 80% year-to-date, which had attracted significant global capital but also raised concerns over stretched valuations and increased volatility. Christian Heck, a portfolio manager at First Eagle Investments, noted that while the KOSPI's valuation appears reasonable compared to U.S. indices, it is "expensive relative to its own history." He added that the index has "largely become a bet on two large memory chipmakers," which together account for about half of its weighting.

Eugene Investment & Securities strategist Huh Jae-Hwan commented, "There are concerns the rally went too far, too fast—the KOSPI rose about 60% in a month and a half, so some pullback is natural." Intraday volatility has become more frequent in the Korean market, with daily swings of 5% or more becoming common, fueled by increased retail margin trading and ETF inflows.

In cryptocurrency markets, Bitcoin edged down 0.1% but managed to hold above the $80,000 level, trading at $81,311.29.