Korean firms express relief for eased uncertainties over US-Iran peace deal

Vessels are anchored in the Strait of Hormuz, as seen from Musandam, Oman, Thursday. Reuters-Yonhap

Prospects of an imminent peace agreement between the United States and Iran have injected a wave of optimism into Korea's petrochemical, aviation and key manufacturing industries, as uncertainties surrounding oil prices and global logistics are expected to ease in the short term.

The breakthrough comes as U.S. President Donald Trump said Saturday that a formal peace memorandum of understanding is slated for signing on Friday.

Trump also said the Strait of Hormuz, a vital maritime chokepoint for global oil and cargo shipments, would be fully reopened immediately after the signing ceremony.

The development has eased concerns over prolonged geopolitical risks for Korea's petrochemical industry, which has borne the brunt of the Middle East conflict among Korea's industries.

The Hormuz blockade had severely disrupted the supply of naphtha, a key petrochemical feedstock, forcing domestic naphtha cracking centers (NCCs) to cut operating rates to as low as 50 percent and declare force majeure to overseas customers.

Though structural challenges, including oversupply from Chinese rivals, remain, major petrochemical firms expect the normalization of logistics to stabilize raw material costs. They also anticipate that supply disruptions caused by the conflict will help ease the supply glut and bring global supply and demand closer to a balanced level.

"The easing of tensions in the Middle East will have a positive short-term impact, especially on feedstock supply," an industry official said. "However, once crude oil production normalizes through the restoration of production facilities, Chinese petrochemical producers may increase output, meaning the market outlook still needs close attention."

Refiners are similarly expecting short-term relief. Since the conflict broke out in late February, the sector has faced crude procurement hurdles due to the shipping blockade. Global oil benchmarks, such as Dubai crude, rocketed from approximately $71 per barrel to a peak of $169 following the armed conflict in the Middle East.

Since the conflict broke out in late February, the industry has faced difficulties in procuring crude oil due to disruptions in shipping routes. Global oil benchmarks, including Dubai crude, surged from around $71 per barrel to as high as $169 following the outbreak of hostilities in the Middle East.

The government introduced measures aimed at stabilizing domestic supply, requiring refiners to keep petroleum product exports below the previous year's level while maintaining domestic supply at more than 90 percent. Coupled with the sharp appreciation of the U.S. dollar against the Korean won, this further weighed on the industry.

Industry officials expect refiners to recover some of the cost pressures once shipping through the Strait of Hormuz resumes and the exchange rate stabilizes. The government is also expected to gradually ease the supply control measures as market conditions normalize.

As the international crude prices are expected to stabilize, hopes are growing for the fuel-sensitive aviation industry. Fuel costs routinely constitute up to 30 percent of operating expenditures for airlines here.

U.S. President Donald Trump speaks to the press in the Oval Office of the White House in Washington, D.C., June 3. AFP-Yonhap

Lower fuel surcharges are expected to reduce the burden of airfare costs, helping support a recovery in travel demand.

Market analysts emphasized that the easing of geopolitical tensions allows investors to refocus on corporate fundamentals, rather than macroeconomic shocks.

Korea Investment & Securities advised investors to pay sharp attention to stocks with strong earnings fundamentals.

"With macroeconomic volatility stemming from the Middle East subsiding, stock prices will once again be driven by earnings visibility and corporate fundamentals," said Kim Dae-jun, an analyst at the securities firm.

Kim remained optimistic for investors to purchase semiconductor stocks due to their strong earnings outlook, and noted that chemical firms are prime candidates for a swift turnaround to profitability as raw material costs stabilize.