The United States and Israel carried out massive joint airstrikes against Iran, and Iran responded with counterattacks, effectively halting ship traffic in the Strait of Hormuz. Experts say that if the strait's closure drags on, the Korean economy could suffer serious damage.
The Strait of Hormuz is a strait that links the northwestern Indian Ocean, the Persian Gulf, and the Gulf of Oman. It is a key maritime import-export route for major Middle Eastern countries such as the United Arab Emirates (UAE), Saudi Arabia, and Iraq, and 25% of the world's crude oil shipments pass through the strait.
James Kim, director of the Korea Program at the Stimson Center, a U.S. think tank, said on the 28th (local time) that a U.S.-Iran war could shock the Korean economy in the energy institutional sector.
Kim said, "Korea relies on the Middle East, where the Strait of Hormuz is located, for 70% of its crude oil imports and up to 30% of its natural gas," adding, "Crude oil and natural gas account for more than 56% of Korea's total energy demand."
Kim said, "Fortunately, Korea holds more than 100 million barrels of crude oil and 52 days' worth of liquefied natural gas (LNG), but if the international passage of ships through the Strait of Hormuz is blocked and the conflict becomes prolonged, there is a high likelihood of significant impacts not only on Korea's power supply but also on its ability to produce and export products."
Senior fellow Emma Ashford projected that oil prices could surge, noting that about 20% of the world's daily oil supply passes through the Strait of Hormuz.
Ashford said, "Historically, even a partial closure—and merely the point at which insurers begin to be wary of safe passage—can trigger an initial oil price spike," adding, "If a large-scale war with Iran affects maritime shipping for other Gulf countries, prices could easily soar."
In fact, oil prices are surging. According to Reuters on the 1st (local time), Brent crude was trading in over-the-counter markets at around $80 per Barrel, up 8%–10% from last Friday's close. With Middle East tensions rising and the Strait of Hormuz effectively sealed off, an even sharper jump is expected after exchanges open on the 2nd.
Rising oil prices and transport disruptions are expected to hit Korea's exports. The Korea Institute for International Economic Policy projected that if oil prices rise 10%, domestic companies' costs would increase 0.38% and exports would fall 0.39%.
If the strait is closed and shippers use detours, ocean freight rates rise 50%–80% from current levels and transit times lengthen by about three to five days. In past conflicts in the Strait of Hormuz, insurance premiums were surcharged by up to seven times, raising significant concerns that shippers' expense burdens will grow.