▲ Financial data is shown on a screen inside the dealing room of Hana Bank in central Seoul on July 20, 2026. (Yonhap)

SEOUL, July 20 (Yonhap) -- South Korean stocks closed more than 4 percent lower Monday, as artificial intelligence (AI) woes resurfaced amid escalating tensions in the Middle East. The Korean won rose against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) plunged 304.33 points, or 4.46 percent, to 6,516.27points, after falling as low as 6,472.80.

"Unfavorable factors related to semiconductors and worsening conflict risks between the United States and Iran dampened investor sentiment," said Lee Kyoung-min, an analyst at Daishin Securities.

On Friday, U.S. stocks closed lower, weighed down by a decline in semiconductors, as the latest AI model unveiled by Chinese startup Moonshot renewed concerns over global spending on AI infrastructure, including semiconductors.

The model, called Kimi K3 and unveiled Friday (local time), is considered to deliver performance, approaching most advanced AI models from the U.S.' OpenAI and Anthropic, at a much lower cost.

This raised speculation over whether the massive capital spending from hyperscalers could be justified, adding downward pressure to the stock market, the analyst added.

Also weighing on the KOSPI was escalating tensions in the Middle East, after the U.S. military announced a third U.S. soldier died in Iraq during back-and-forth attacks between the U.S. and Iran.

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