Korea braces for prolonged energy price risks as Iran war expected to drag on

Industry Minister Kim Jung-kwan, left, speaks during a meeting with related ministries and industry groups at Government Complex Sejong, Thursday, to review supply conditions amid the Middle East conflict. Courtesy of Ministry of Trade, Industry and Resources

The government is preparing for a prolonged period of elevated energy prices and supply uncertainty, as U.S. President Donald Trump’s address on Wednesday (local time) failed to signal that the Middle East conflict will end soon.

It plans to maintain the fuel price caps and seek alternative oil sources outside the Middle East, as Trump said countries importing oil through the Strait of Hormuz should make their own efforts to secure passage or pursue other options.

Officials here assess that even if the Middle East conflict is “nearing completion” as Trump claims, it is unlikely to restore the energy supply and markets to prewar stability immediately.

“Even if Trump ends the war, the war will not be over for us at the industry ministry. We expect to remain in a wartime situation,” Yang Ki‑wook, director general of the industrial resource security bureau at the Ministry of Trade, Industry and Resources, said Thursday during a briefing at Government Complex Sejong.

“An end-of-war declaration, even if it is made, does not mean that safe passage through the Strait of Hormuz is secured, and uncertainty remains. It will take considerable time for this distorted supply chain to return to normal, so the current crisis response framework should continue even after the war ends.”

The remark followed Trump's televised address, in which he claimed that U.S. military objectives in Iran are nearing an end, but there will be a few more weeks of intense strikes. He also made clear that it will be up to oil‑importing nations to secure the Strait of Hormuz.

“The countries of the world that do receive oil through the Hormuz Strait must take care of that passage,” he said. "We will be helpful, but they should take the lead in protecting the oil that they so desperately depend on."

Officials believe that any easing of hostilities will not quickly translate to relief for global oil flows, nor will it end disruptions to naphtha and other energy supplies.

Yang explained the government expects it will take at least a month after the war ends for conditions to ease.

“It will take much longer than a month for this disrupted supply chain to recover," he said, adding it will take even more time for domestic production to fully normalize as companies juggle inventories.

Yang Ki‑wook, director general of the industry ministry's industrial resource security bureau, speaks during a daily briefing at Government Complex Sejong, Tuesday. Courtesy of Ministry of Trade, Industry and Resources

A new study by the Korea Institute for International Economic Policy (KIEP) supports the government’s cautious stance, concluding that oil prices are unlikely to return to prewar levels under any of the three scenarios it assessed — an early ceasefire, a prolonged war with Hormuz closure or escalation with strikes on energy infrastructure.

It reported that Brent crude, which averaged around $63 per barrel before the conflict, is projected to hover around $90, $117 and $174 per barrel in each scenario, respectively, warning that the continued escalation with further attacks on energy facilities will result in record-high oil prices.

The industry ministry said it has secured about 50 million barrels of alternative crude supply for this month, while exploring sourcing options, including oil from Saudi Arabia, Oman, Kazakhstan and the United States, and naphtha from Algeria and Greece.

Meanwhile, as the disruption is expected to stretch on, Seoul is also considering tighter oversight of petrochemical supply chains, after restricting naphtha exports on March 27.

Industry Minister Kim Jung-kwan said the government is preparing measures to prohibit hoarding of key materials such as plastics and packaging inputs derived from naphtha to stabilize supply and prevent disruptions to essential goods.

“Given the variety of petrochemical products and the complexity of their supply chains, we will closely monitor any signs of stress in supply and demand,” he said during a meeting on Thursday.

“Because naphtha is the key material for not only industries but also people's everyday lives, we will respond with all the tools at our disposal.”