South Korean defense stocks rallied on Tuesday on hopes of potential easing of tensions between Iran and the U.S., boosting sentiment toward a country that relies heavily on Middle Eastern energy imports.

The rally extended a surge that has seen South Korea-focused ETFs Shares MSCI South Korea ETF (NYSE:EWY) and Direxion Daily South Korea Bull 3X ETF (NYSE:KORU), as well as the PLUS Korea Defense Industry Index ETF (NYSE:KDEF) gain between 16% and more than 1,400% over the past year.

iShares MSCI South Korea ETF (NYSE:EWY)

The fund is the largest U.S.-listed fund focused on South Korean equities, providing exposure to some of the country’s biggest companies.

The fund has approximately 24.31billion in assets under management and charges an expense ratio of 0.59%.

Price Action: EWY, which climbed 7.09% on Tuesday, has gained roughly 117% year-to-date and is up 218% over the past 12 months.

Direxion Daily South Korea Bull 3X ETF (NYSE:KORU)

The ETF seeks to deliver three times the daily performance of an index of South Korean equities and has about 55.19 million in assets under management and charges an expense ratio of 1.32%.

Price Action: KORU rose 21.4% on Tuesday and has gained 448% year-to-date and is up 1,425% over the past 52 weeks.

PLUS Korea Defense Industry Index ETF (NYSE:KDEF)

KDEF provides targeted exposure to South Korea’s defense sector, including companies involved in aerospace, weapons systems and military technology.

The ETF has an 140.44 million assets under management and charges an expense ratio of 0.65%.

Price Action: The ETF gained 4.36% on Tuesday, and has risen 8.5% so far this year and 16% over the past year.

Other ETFs, including Franklin FTSE South Korea ETF (NYSE:FLKR) gained 7% and Matthews Korea Active ETF (NYSE:MKOR) 5.43% in Tuesday’s trading session.

The best-performing major index globally this year, the Korea Composite Stock Price Index (KOSPI), closed 2% higher on Tuesday. The index has risen as much as 105% so far this year and nearly 200% over the past year.

The move comes as investors assess developments in the Middle East, as Iran's semi-official news agency Fars reported Monday that a memorandum between Washington and Tehran would keep shipping through the Strait of Hormuz uninterrupted for 60 days, with the possibility of Iran imposing tolls thereafter.

Kang Tae Ho, an analyst at South Korean brokerage DS Investment and Securities told CNBC, that the end of the Iran war would serve as a "positive catalyst" for the Korean defense industry.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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