South Korea's economy has enjoyed a boost since the inauguration of President Lee Jae Myung, but now finds itself bracing for the impact of the US attacks on three of Iran’s core nuclear sites — Fordow, Natanz and Isfahan.
On Sunday, US President Donald Trump said in an address at the White House that Tehran’s “key nuclear enrichment facilities” had been “completely and totally obliterated” by US forces.
“There will be either peace, or there will be tragedy for Iran, far greater than we have witnessed over the last eight days,” noted Trump, adding that the US will go after other targets if Iran does not agree to peace.
Industry insiders here are concerned that this escalation of the conflict in the Middle East may increase oil prices in Korea, which imports approximately 70 percent of its crude oil from the region.
Even before the direct intervention of the US, Korea’s oil price had soared after an uptick in global crude oil prices, primarily driven by the ongoing Israel-Iran conflict that started June 13.
As of Friday, Key international oil benchmarks — WTI Crude and Brent Crude — surged 5.29 percent and 3.75 percent to $76.84 and $77.01 per barrel, respectively, compared to June 13. According to the Korea National Oil Corporation, domestic gasoline prices for the third week of June rose by 0.48 percent from the previous week, reaching 1,635.5 won per liter.
“A rise in global crude oil prices could lead to several economic uncertainties, including fluctuations in Korean companies’ stock prices and government bonds,” said Kim Tae-hwang, an international trade professor at Myongji University.
Kim warned of a worst-case scenario in which Iran pursues retaliatory actions, including blocking one of the most important passages for oil tankers, the “Strait of Hormuz.” This could negatively impact Korean companies, with skyrocketing maritime freight rates and disruption in the global supply chain.
Kang Jin-hyuk, a researcher at Shinhan Investment Corp., also stated in a report on Friday that the key factor is whether or not Iran would shut down the Strait of Hormuz.
"However, Iran’s leverage could be limited by potential backlash from disrupting oil exports to allies like China, economic harm from controlling a strait crucial for 85 percent of its trade and the US’ capacity to offset oil shocks with shale gas production," said Kang.
“If the conflict between the US and Iran goes on, and this does not necessarily include the onset of World War III — which is unlikely — but a prolonged stalemate in their nuclear negotiations could extend market uncertainty,” said Kim. “This situation might force the Bank of Korea to raise the base rate, potentially leading to inflation.”
The Industry of Trade, Industry and Energy held an emergency meeting later in the day to assess the potential impact the US airstrikes on Iran’s nuclear sites could have on domestic industries.
The ministry will examine the current status of domestic crude oil and liquefied natural gas supplies, the operation of oil tankers and LNG carriers on Middle Eastern routes, and response measures for possible logistics disruptions. The ministry explained that it has secured approximately 200 days’ worth of oil reserves and natural gas stocks, ensuring no immediate supply glitches.
