President Lee: "Implementation of Petroleum 'Price Ceiling'... Central Bank to Prepare Additional Measures"
Emergency Economic Review Meeting Convened to Prepare for 'Complex Shock from the Middle East'
"Prepare Preemptive Measures with a Sense of Urgency, Keeping the Worst-Case Scenario in Mind"
Order to "Identify Alternative Energy Supply Lines"
President Lee Jaemyung has ordered the swift introduction of a price ceiling on petroleum products and an active review of expanding the 100 trillion won market stabilization program in response to the escalating crisis in the Middle East. He called for simultaneous management of volatility in the financial and foreign exchange markets, as well as energy supply instability, and urged acceleration of reforms to strengthen the structure of the capital market using this crisis as an opportunity.
On the morning of March 9, at an emergency economic review meeting on the Middle East situation held at the main building of the presidential office, President Lee stated, "As the crisis in the Middle East deepens, uncertainty in both domestic and international economic environments is growing significantly," adding, "Since it is difficult to predict how the situation will unfold, the government must prepare preemptive countermeasures with an extraordinary sense of urgency, keeping even the worst-case scenario in mind."
President Lee further emphasized, "A crisis always imposes even greater hardship on ordinary citizens, who are already struggling. Please do your utmost to minimize the temporary pain experienced by the people," and added, "A crisis is also an opportunity. How we prepare for and respond to the same situation determines what comes next."
President Lee placed particular emphasis on financial and foreign exchange market responses. He said, "Finance is the lifeblood of our economy," and stressed, "We must respond proactively to increased foreign exchange market volatility, moving beyond past approaches to meticulously identify and address even hidden risks." He continued, "If necessary, the market stabilization program, which has been prepared with a scale of 100 trillion won, should be actively expanded, and both government and central bank-level measures should be prepared in advance."
He also reiterated the need for capital market reform. President Lee stated, "We must take strict action against those who seek to exploit difficult market conditions for unfair gains," and added, "I hope we can use this situation as an opportunity to expedite the implementation of reform tasks aimed at improving the structure of our capital market." This reflects his intention to use the crisis not merely as a defensive measure but as an opportunity to restore order in the market.
Regarding energy supply measures, President Lee called for diversification of supply sources to reduce dependence on the Middle East. He said, "Given the seriousness of instability in energy supply and prices, extraordinary measures commensurate with the situation are needed," and added, "It would be beneficial to swiftly identify alternative supply routes that do not pass through the Strait of Hormuz, in cooperation with strategic partner countries."
President Lee also announced a firm stance on cracking down on the domestic oil distribution market. He instructed strict enforcement against illegal practices such as collusion among refiners and gas stations, hoarding, and stockpiling, stating, "Sanctions should be imposed that are several times greater than any profits gained from violations." He further mentioned the need for direct price controls in response to surging oil prices, saying, "For petroleum products that have recently seen excessive price increases, a price ceiling system should be promptly introduced and implemented boldly." This signals his intention to go beyond mere market crackdowns and consider institutional price stabilization mechanisms, as the Middle East crisis increases the likelihood of higher domestic fuel prices and living costs.
He once again emphasized the need for comprehensive measures to mitigate the impact of rising energy prices on low-income households. President Lee said, "The burden of higher prices caused by rising energy costs falls first and most heavily on ordinary people," urging, "Careful and effective measures must be prepared." He added, "If the current Middle East crisis becomes prolonged, the ripple effect on the real economy could be significant, so please prepare thoroughly and meticulously using all available means."
Possibility of Prolonged Middle East Crisis... Emergency Meeting to Prepare for 'Complex Shock from the Middle East'
KOSPI Plunges Sharply in Early Trading, Sell-Sidecar Triggered
KRW-USD Exchange Rate Fluctuates in the 1,490 Won Range
The background for President Lee's convening of this meeting is the prolonged disruption of passage through the Strait of Hormuz. The Strait of Hormuz, which accounts for about 20% of the world's crude oil and liquefied natural gas (LNG) supply, is effectively blocked. As a result, the Kuwait Petroleum Corporation (KPC) declared 'force majeure' on March 7 (local time) after shipments were halted due to the Middle East war, announcing plans to cut oil production. This indicates that the shock originating from the Middle East has spread beyond a simple geopolitical risk to become a variable affecting real supply chains around the world.
The attendance of the Ministry of Economy and Finance, the Ministry of Trade, Industry and Energy, the Ministry of Climate, Energy and Environment, the Ministry of Planning and Budget, the Ministry of Agriculture, Food and Rural Affairs, the Fair Trade Commission, and the National Tax Service at the meeting presided over by President Lee is seen as a move to prepare for complex shocks. It is likely that issues such as securing energy supply and import channels, the speed at which refiners and gas stations pass on price increases, the possibility of collusion and hoarding, the impact on agricultural and processed food prices, and tax support will all be discussed at one table.
At the meeting, Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance Koo Yooncheol reported on "Assessing the Impact on the Real Economy and the Direction of the Government-wide Response," while Minister of Industry Kim Jeonggwan presented on "Measures for Oil and Gas Supply and Price Stabilization." Subsequently, Financial Services Commission Chairman Lee Eogwon shared "Assessment of Financial Market Conditions and Response Measures." A presidential office official explained, "This meeting was convened to bring together all relevant ministries to review the current situation, set priorities, and ensure swift decision-making among related departments."
International oil prices are already reflecting the impact of the Middle East crisis in earnest. On the morning of March 9, international oil prices soared to the 100 dollars per barrel range. On the New York Mercantile Exchange, West Texas Intermediate (WTI) futures prices reached 107.54 dollars per barrel. This is the first time since July 2022 that WTI prices have exceeded 100 dollars per barrel. Brent crude oil also surpassed 100 dollars per barrel. This is interpreted as international oil prices starting to reflect the possibility of a prolonged Middle East crisis.
The government has activated a 24-hour emergency response system to minimize the economic shock from the Middle East crisis. On March 6, Chief Presidential Secretary Kang Hoonshik held an unscheduled briefing and announced that, in coordination with the United Arab Emirates (UAE), Korea would urgently import 6 million barrels of crude oil. Two Korean-flagged oil tankers will be moored at alternative UAE ports that do not require passage through the Strait of Hormuz, and 4 million barrels of oil stored at these ports will be transported. An additional 2 million barrels from Korea's joint reserves with the UAE can also be used if necessary.
However, the immediate problem is not the depletion of reserves, but the gasoline and diesel prices felt by consumers. As of the morning of March 9, according to Opinet, the average gasoline price at gas stations nationwide had risen to 1,896.24 won per liter, and diesel to 1,918.60 won. In Seoul, gasoline stood at 1,947.32 won and diesel at 1,968.09 won. Although the rapid daily increases observed recently have eased somewhat, the usual 2- to 3-week lag between changes in international oil prices and domestic gas station prices means further increases cannot be ruled out. The government's move to consider a price ceiling, as directed by President Lee, is due to these concerns.
The impact of rising oil prices on the cost of living must also be closely monitored. In February, the consumer price index rose 2.0% year-on-year, with the core inflation rate (excluding food and energy) up 2.3%, and the cost of living index up 1.8%. While the February figures do not indicate a significant deviation from the management range, the recent surge in oil prices is not yet fully reflected in these numbers, so caution is warranted. After March, higher fuel costs may spread to logistics, processed foods, dining out, and livestock product prices.
There are also significant concerns about financial market volatility. On March 4, the KOSPI fell 12.06% to close at 5,093.54 amid the shock of the Middle East war, recording the largest drop ever. The KRW-USD exchange rate surged to 1,505.8 won during the trading session, hitting a 17-year low. Even on March 9, as international oil prices rose again and the situation worsened, the KRW-USD rate opened 16.6 won higher at 1,493.0 won and continued to fluctuate in the 1,490 won range. The KOSPI also plunged more than 8% during morning trading, falling to the 5,096 level. Around 9:06 a.m. after the market opened, the KOSPI 200 futures volatility triggered a sidecar (temporary suspension of program sell orders).
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Going forward, the government's top priority is expected to be preemptively countering the deepening aftershocks of the Middle East war. The government is likely to intensify efforts to address short-term supply instability using reserves and emergency imports from the UAE, slow the pace at which rising oil prices are passed on to consumer prices, and manage exchange rate and stock market volatility.
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