According to forecasts from several major global banks, the South Korean won appears poised for further depreciation as rising energy prices threaten economic growth in the world's eighth-largest oil consumer. On Tuesday, the won fell more than 4.6% at one point, its largest intraday decline since 2010, as concerns over a potential Iran war dampened sentiment toward risk assets. The currency breached the 1,500 won per U.S. dollar level, hitting its lowest point since the global financial crisis. On Wednesday, the won recovered some of its losses after market opening.

Wee Khoon Chong, a market strategist at BNY Mellon, stated that a value-at-risk shock led to large-scale capitulation selling and indiscriminate risk-off moves on Tuesday. He noted that, in a worst-case scenario, the won could fall to around 1,570 per dollar. During Asian trading hours on Wednesday, the won rose more than 1.2%, with the dollar-won rate quoted at 1,471.30.

The Bank of Korea said in a statement on Wednesday that authorities would closely monitor whether the exchange rate and bond yields show excessive deviations from South Korea’s economic fundamentals, such as the current account balance. In recent months, the won has experienced significant volatility—strengthening largely due to a surge in Korean stocks, while weakening because of Seoul’s pledge to invest $350 billion in the U.S. in response to potential American tariffs. Now, fears that rising oil prices could hurt South Korea’s trade balance, combined with Iran war concerns, have tilted the scales in favor of bears.

Foreign exchange options traders are among those anticipating further weakness in the won. Implied volatility suggests they see about a 36% probability that the currency will fall to 1,550 per dollar by June.