Will the Strait of Hormuz Be Blocked?... Refining and Petrochemical Industries Face Inevitable Impact [US-Iran War]

As the United States has launched airstrikes against Iran, escalating the geopolitical crisis in the Strait of Hormuz, domestic refining and petrochemical industries are expected to inevitably face deteriorating profitability due to a surge in oil prices and the potential blockade of transportation routes.

According to industry sources on February 28, 69.1% of crude oil imported last year originated from the Middle East, and of this, 95% entered the country through the Strait of Hormuz. While South Korea does not import Iranian crude oil, most of the crude oil from Saudi Arabia, Kuwait, and the United Arab Emirates (UAE) is brought in via the Middle East’s Strait of Hormuz. Therefore, this airstrike is expected to have a significant impact on domestic oil prices.

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With mounting instability in the Middle East, international oil prices have already been on the rise recently. As of February 27, Dubai crude oil-a benchmark for domestic pricing-closed at $71.25 per barrel, up $0.71 from the previous day. West Texas Intermediate (WTI), another major benchmark, also rose by $1.81 from the previous day to reach $67.02 per barrel.

Similarly, in June last year, oil prices soared as the Middle East situation became unstable. At that time, the Iranian parliament voted to blockade the Strait of Hormuz in response to a U.S. airstrike on Iranian nuclear facilities, which led to a sharp rise in oil prices.

However, as of the end of last year, the country had stockpiled approximately seven months’ worth (221 days) of oil, providing a buffer to respond to potential disruptions in crude oil supply in case of emergency.

Refining companies are strengthening their monitoring of global oil market fluctuations to minimize the impact on domestic consumers and the petroleum market in preparation for any contingency. For domestic petrochemical companies already experiencing a prolonged downturn, this could become a double blow. This is because, as oil prices rise, the prices of primary raw materials such as naphtha also increase, and unstable conditions drive up logistics costs, further adding to the burden on the petrochemical sector.

An industry official said, “If the Strait of Hormuz is blocked, crude oil supply stability will be undermined worldwide and there is a high likelihood of disruptions in supply and demand,” adding, “It is also feared that weakened oil demand could negatively impact company performance.”

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