An analysis found that if the Strait of Hormuz remains blocked for more than three months, the average production cost of Korea's manufacturing sector will surge 11.8%. Because Korea relies on imports for most of its energy, including crude oil and liquefied natural gas (LNG), a prolonged crisis is expected to hit basic industries such as power generation, city gas, and refining in succession.
The Korea Institute for Industrial Economics & Trade (KIET) on the 19th released a report titled "U.S.-Iran conflict and Hormuz risk: Supply chain scenario analysis and implications." According to the report, 27% of the world's crude oil and 22% of LNG pass through the Strait of Hormuz. The report projected that if the blockade lasts within three weeks, oil prices will rise to $105–$125 per Barrel; if one to three months, $120–$160; and if more than three months, $150–$180. It said LNG prices could climb an additional 150%–200%, and in an extreme scenario, oil could exceed $200.
An analysis using the Bank of Korea's input-output tables projected that if the blockade ends within three weeks, the average production cost across all industries will rise 4.2%, and manufacturing will increase 5.4%. If it lasts more than three months, they would jump to 9.4% and 11.8%, respectively.
By industry, the impact is estimated to be greatest in chemical products (14.8%); nonmetallic minerals (12.1%); transport services and primary metals (8.9%); mining products (8.5%); and wood, paper, and printing (7.4%). In particular, some industrial gases and chemical feedstocks have supply structures linked to petrochemical processes, heightening concern that disruptions in energy supply could immediately affect the procurement of industrial raw materials.
Flagship exports such as semiconductors and automobiles face relatively lower direct energy expense shocks, but the report noted that because this analysis reflects only the direct input effect of energy prices, the actual shock could far exceed the estimates if raw material supply disruptions also occur.
Accordingly, the Korea Institute for Industrial Economics & Trade (KIET) called for diversifying energy and raw material procurement and establishing an integrated monitoring system. It also said Korea needs to respond preemptively to reconstruction demand, including Middle East infrastructure projects and food security investments that will resume after the crisis ends.