Opening NSC... Breathless Response to Security and Economy

Blue House to Hold Standing Committee Meeting This Afternoon
Seong Yun-mo, Minister of Trade, Industry and Energy, Directed to Attend
Concerns Over Oil Supply if Hormuz Strait Blocked
Real Economy Adversely Affected by Oil Price Fluctuations

On the 6th, KOSPI opened at 2154.97, down 21.49 points (0.99%) from the previous trading day due to increased volatility in the global financial markets caused by tensions in the US and the Middle East. Dealers are working in the dealing room of KEB Hana Bank in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Lim Cheol-young] As the likelihood of a clash between the United States and Iran increases, South Korea's crude oil supply is also facing an emergency. If global trade contracts due to instability in the Middle East, the export-dependent South Korean economy is expected to suffer significant damage. With Iran effectively withdrawing from the nuclear agreement, a major variable has emerged in the security situation on the Korean Peninsula. The government is holding consecutive emergency meetings and closely monitoring the situation.

The Blue House announced that on the afternoon of the 6th, it will hold a Standing Committee meeting of the National Security Council (NSC) chaired by National Security Office Director Chung Eui-yong regarding the escalating conflict between the U.S. and Iran. In this context, President Moon Jae-in instructed, "Closely examine not only the security situation but also the safety of local Korean residents and crude oil supply," and ordered that Minister of Trade, Industry and Energy Sung Yun-mo attend the NSC Standing Committee meeting in addition to the existing members, according to Blue House spokesperson Ko Min-jung. Minister Sung was originally scheduled to depart that evening to attend the Consumer Electronics Show (CES) in the United States.

Separately, the Ministry of Trade, Industry and Energy plans to hold a "Petroleum and Gas Supply and Price Trend Monitoring Meeting" at 2 p.m. on the same day, chaired by Energy Resources Director Joo Young-joon. A ministry official said, "Although the uncertainty in the usual environment is high, we are continuously monitoring the situation," adding, "We will do our utmost to diversify and secure competitiveness to actively respond to external changes and shocks." The Ministry of Foreign Affairs has also been operating a task force led by First Vice Foreign Minister Cho Se-young since the 5th to prepare for the Middle East situation.

First and foremost, South Korean government authorities are most concerned about the impact on crude oil supply. If Iran blocks the Strait of Hormuz, through which 70% of domestic imported crude oil passes, energy supply and imports could be disrupted. If crude oil prices surge, exports?which have been declining for 13 consecutive months?will find it difficult to escape the slump. On the 3rd (local time), international oil prices fluctuated sharply. Brent crude rose 3.6% compared to the previous day, and West Texas Intermediate (WTI) crude increased by 3.1%. WTI reached its highest level in about eight months since May last year. As of 11 a.m. on the 6th, March Brent crude surpassed $70 per barrel.

Professor Choi Won-mok of Ewha Womans University Law School expressed concern, saying, "For countries like South Korea that import crude oil, increased volatility in oil prices inevitably leads to greater uncertainty," adding, "The adverse effects on the real economy are also considerable." He further advised, "In policies aimed at reducing dependence on China and Japan, the Middle East region is important and serves as a foothold for advancing into Europe. It is desirable to participate in military actions with the U.S. while clearly stating objectives such as securing peaceful crude oil transportation routes."

However, some market analysts assess that the possibility of a blockade is low and would be limited. Samsung Securities researcher Shim Hye-jin diagnosed, "Since the U.S. 'Operation Iraqi Freedom' in March 2003, this is the highest level of tension, so geopolitical risks will remain elevated for the time being, keeping international oil prices at current levels." Shinhan Financial Investment researcher Han Yoon-ji also evaluated that the possibility of abnormalities in global crude oil supply and demand due to the U.S.-Iran confrontation is limited. She observed, "Iran currently accounts for only 2% of global crude oil production, and the possibility of Iran blocking the Strait of Hormuz is minimal."

[Image source=Reuters Yonhap News]

This content was produced with the assistance of AI translation services.