Seoul shares tumbled nearly 6% on Wednesday, dragged down by a sharp selloff in chipmakers, as surging oil prices and a global spike in bond yields dampened investor sentiment. The South Korean won strengthened against the US dollar amid the risk-off mood.

The benchmark Korea Composite Stock Price Index (KOSPI) closed down 398.66 points, or 5.8%, at 6,471.17, after touching an intraday low of 6,400.81. Shortly after the market opened, the Korea Exchange triggered a sell-side circuit breaker, halting program trading on KOSPI components for five minutes. The mechanism is activated when the KOSPI200 futures index drops 5% or more for at least one minute.

Overnight, major US stock indexes closed lower. Stalled peace negotiations between the US and Iran weighed on sentiment while pushing oil prices higher. Concerns that persistently high energy costs could keep inflation elevated drove the 30-year US Treasury yield to its highest level since 2007.

Trading volume was moderate, with 302.07 million shares changing hands for a total value of 22.94 trillion won (approximately $16.4 billion). Declining stocks far outpaced advancers, with a ratio of 700 to 171. Foreign investors and institutions were net sellers of 348.8 billion won and 132.4 billion won, respectively, while retail investors bought a net 463.6 billion won.

"As bond yields rise, concerns over the semiconductor sector's outlook have resurfaced, prompting foreign and institutional investors to offload local chip stocks like Samsung Electronics and SK Hynix," said Lee Kyung-min, an analyst at Daishin Securities.

In Seoul, chipmakers led the market downturn. Market bellwether Samsung Electronics tumbled 7.82% to 247,500 won, while rival chipmaker SK Hynix plunged 9.75% to 1.5 million won. SK Square, the parent company of SK Hynix, fell 11.54% to 1 million won, and Samsung Electro-Mechanics, the electronic components arm of Samsung Electronics, slipped 3.68% to 1.38 million won. Meanwhile, Hanwha Aerospace rose 2.71% to 1.177 million won after announcing that its US subsidiary had secured a contract to deliver K9 self-propelled howitzer prototypes to the US Army.

As of 3:30 p.m., the won was trading at 1,397.7 per US dollar, up 14.1 won from the previous session's close.