SEOUL, KOREA - Shinyoung Securities said on June 15 that the situation in Iraq is quite different from the past and it wouldn't pose any threat to the Korean economy and the stock market. The securities firm further said this is not a long-term risk factor and the KOSPI would recover any time soon.

 

Kim Jae-hong, Shinyoung Securities analyst, said, "The negative impact of the Iraqi situation wouldn't last for long. The biggest factor in support of this prediction is that there is ample room for other oil-producing countries in surrounding areas to increase oil output."

 

For example, the Iranian government is showing positive attitudes toward the upcoming meeting between June 16 and 20 with the U.S. government over nuclear issues. The fact that major Organization for Petroleum Exporting Countries members have not increased their share of oil output recently suggests that there is a possibility that they would increase output in response to Iraq's production shortfalls. Unlike the first Gulf War in 1990 that engulfed both Kuwait and Iraq, this time it is the problem of Iraq only. 

 

Kim of Shinyoung Securities added, "Given the prohibitively high cost of war to be shouldered by industrialized nations including the United States, the likelihood of a war pitting Iraq against everyone else in the west is very slim. If the risk is not long term, it may rather be used as a chance to buy more shares."