South Korean construction stocks posted sharp gains, buoyed by the possibility of a ceasefire between the United States and Iran. Buying was driven by expectations that South Korean builders could participate in rebuilding Middle East infrastructure destroyed by the war.

According to the Korea Exchange on March 27, the KRX Construction Index rose 8.33% from March 20 to March 26, the steepest gain among all sector indices. Over the same period, the KOSPI slipped 0.6% from 6,852.58 to 6,808.21, remaining rangebound. The construction rally stood in stark contrast to the KRX Semiconductor and KRX Information Technology indices—which have led the domestic market’s strength—falling 1.75% and 1.79%, respectively.

Among individual stocks, Hyundai Engineering & Construction (000720.KS) surged 14.59%, the biggest gainer in the sector. Daewoo Engineering & Construction (047040.KS) climbed 14.3%, while GS Engineering & Construction (006360.KS) and DL E&C (375500.KS) rose 6.18% and 2.95%, respectively, as major construction names broadly strengthened.

The immediate catalyst was the prospect of a US-Iran ceasefire. On March 25, Russian state news agency RIA Novosti, citing Iranian security agencies and Pakistani military sources, reported that the two countries had agreed to a truce and that free navigation through the Strait of Hormuz had been restored. Pakistan’s Interior Minister Mohsin Naqvi, who is mediating negotiations between Washington and Tehran, also posted on X after meeting with Iranian leadership on March 24: “Significant progress has been made. I hope this momentum helps pave the way for further progress and lasting peace in the region.”

The shifting geopolitical landscape put South Korean construction firms—seen as prime beneficiaries of Middle East reconstruction—in the market spotlight. Normalizing navigation through the Strait of Hormuz is considered a critical precondition for resuming logistics and construction projects across the Middle East.

Domestic Mega Projects Add Fuel to the Rally

Alongside Middle East reconstruction hopes, large-scale domestic projects are also underpinning construction stocks. The Honam semiconductor complex being pursued by Samsung Electronics (005930.KS) and SK Hynix (000660.KS) is a prime example. Beyond factory construction, demand for related infrastructure—including nuclear power plants for electricity supply and AI data centers—is expected to grow in tandem.

Kim Sun-mi, a research fellow at Shinhan Securities, said: “Volatility in the construction sector has increased, but upside potential continues to expand relative to downside risk. South Korea’s nuclear power business could scale up, and mega projects are moving faster than expected—including the power supply agreement for the Honam semiconductor industrial complex, Samsung Electronics’ production line orders, and GS Group’s AI data center groundbreaking in November.”

Data Centers Emerge as a Key Earnings Driver

Data centers, in particular, are expected to become a core earnings driver for construction firms. Kim Seung-jun, an analyst at Hana Securities, said: “Data centers remain the most potent upside catalyst for the second half. We expect news on GS Group’s Donghae AI data center, and DL E&C is anticipated to secure data center contracts worth 2 trillion won (approximately $1.4 billion) in the second half.”

The sharp rally in construction stocks reflects the simultaneous impact of an external factor—shifting Middle East geopolitics—and an internal driver—domestic semiconductor and AI infrastructure investment. That said, with the US-Iran ceasefire yet to be officially announced, some analysts caution that stock price volatility could intensify depending on how negotiations unfold.