On Saturday, the U.S. and Israel initiated military operations against Iran, prompting Iranian retaliation. This escalation has businesses on high alert, closely monitoring the unfolding situation in the Middle East.
While South Korean companies have no direct presence in Iran to mitigate immediate risks, soaring international oil prices could trigger a domino effect on key raw material costs, posing significant challenges.
Of particular concern is the possibility of Iran blocking the Strait of Hormuz, a critical chokepoint through which over 70% of South Korea’s crude oil imports transit.
A senior industry analyst commented that U.S. and Israeli military actions against Iran have heightened concerns over oil prices. The analyst said that while refineries could see short-term gains, an inevitable spike in raw material costs would ripple through the broader economy, and added that global demand is likely to weaken amid growing geopolitical instability.
Recent tensions in the Middle East have already driven up international oil prices. This week, Dubai crude jumped $1 to $70.3 per barrel. International gasoline prices (92 RON) surged $3.5 to $78.6, while international diesel (0.001% sulfur) rose $1.7 to $92.4. The stalled U.S.-Iran negotiations have further fueled this upward trend.
As military confrontation becomes more likely, industry experts anticipate a steeper climb in oil prices. Choi Ye Chan, an analyst at Samsung Securities, warned that if Iran clashes militarily with Western forces, it could resort to extreme measures such as laying mines or conducting military exercises to disrupt traffic through the Strait of Hormuz, which would almost certainly push oil prices higher. Iran’s control over this critical oil transit point means most tankers from the Middle East to Asia and Europe must navigate these waters.
Analysts predict that escalating oil prices will trigger a cascade effect on logistics and raw material costs. The shipping industry is particularly vigilant, as the Strait of Hormuz is a crucial passage for major Middle Eastern oil producers. Any disruption could significantly increase logistics expenses for export-dependent companies.
A spokesperson for a major South Korean conglomerate said the company does not expect direct impacts because it has minimal business presence in Iran, but added that indirect effects are unavoidable given the conflict zone’s strategic importance for global logistics. The spokesperson also said the geopolitical tensions are raising serious concerns about supply chain stability.
The oil price surge is expected to exert upward pressure across the entire commodities market. Raw material prices typically exhibit high volatility during geopolitical crises, with military conflicts often triggering sharp spikes.
Experts are closely monitoring potential ripple effects on the South Korean economy. The Korea International Trade Association projects that a 10% increase in oil prices could lead to a 0.39% decrease in exports and a 2.68% increase in imports. While export prices might rise 2.09%, export volume is expected to fall 2.48%, resulting in a net decline in export value of 0.39%. Import costs will inevitably rise due to higher prices. The same oil price hike could raise corporate production costs by 0.38%, with manufacturing rising 0.68% and services 0.16%.
A global risk officer at a major economic think tank noted that a Middle East-wide conflict would have severe repercussions, but added that if hostilities remain localized, the impact could be less dramatic than many fear. The officer also pointed out that despite long-standing expectations of potential U.S. action against Iran, oil prices have remained relatively stable, suggesting the market may already have partially priced in that risk.
Yoo Seung Min, a Samsung Securities analyst, outlined how various military scenarios could impact oil markets. He suggested that U.S. blockades of Iranian oil ports or Iranian disruption of Gulf oil shipments would likely push prices higher. More severe actions, such as direct U.S. strikes on Iranian oil facilities or Iranian attacks on Gulf oil infrastructure, could exacerbate inflation risks and destabilize other regions.
The Trade Association’s assessment indicates that while short-term export impacts from U.S.-Iran clashes may be limited, the resilience of global trade in the medium term remains a critical factor. They emphasized that immediate export disruptions should be minimal. However, given that South Korea sources 70.7% of its crude oil and 20.4% of its LPG from the Middle East, vigilant monitoring and robust risk management strategies are essential.”