Home > Business > Economy

Korea's hopes of economic rebound dealt blow as Iran throttles oil shipping after U.S. strike

Published: 02 Mar. 2026, 19:09 Updated: 02 Mar. 2026, 20:19

This image provided by U.S. Central Command shows the Arleigh Burke-class guided-missile destroyer USS Thomas Hudner (DDG 116) firing a Tomahawk Land Attack Missile (TLAM) in support of Operation Epic Fury, on Sunday, March 1, 2026. [AP/YONHAP]

Korea had been anticipating — or rather, hoping — that March would snap the cold spell blighting the country's economy, only to see its prospects fall as the U.S. and Israeli attack on Iran delivered a shock to international oil prices along with the unpredictability of global tariffs.

While exports and consumption have been rebounding on the back of a semiconductor supercycle and a buoyant stock market, fresh uncertainty is mounting due to sweeping global tariffs announced by the Donald Trump administration and escalating tensions in the Middle East.

The benchmark Brent crude traded at $80.51 per barrel as of 8 a.m. on Monday, up 9.8 percent from the previous day, according to Europe's Intercontinental Exchange. The surge followed Iran’s move to block the Strait of Hormuz after the U.S. and Israeli military strikes. With around 20 percent of global oil consumption passing through the strait, any prolonged disruption is all but guaranteed to result in further oil price increases.

If higher transportation costs and supply instability persist, Korea — which imports more than 70 percent of its crude oil from the Middle East — would also face a direct blow.

“If this does not end as a short-term event and clashes between the United States and Iran continue for one to two months, we need to keep the upper end of international oil prices open to $90,” said Jeon Kyu-yeon, a researcher at Hana Securities.

The foreign exchange market is also showing renewed volatility. The won had strengthened to the 1,420 range against the dollar in recent days, only to close at a weaker won of 1,444 as of 2 a.m. on Saturday in the Seoul foreign exchange market. The won is expected to continue waning as investors flock to safe-haven assets such as the dollar.

An aerial view of the Iranian shores and the island of Qeshm in the strait of Hormuz, Dec. 10, 2023. [REUTERS/YONHAP]

“The impact on the exchange rate and financial markets will be significant,” said Kim Tae-hwang, a professor of international trade at Myongji University. “Corporate risks could also expand due to a weaker won and reduced transactions.”

The timing is particularly unfortunate for Korea, as recent data had pointed to a long-awaited recovery. Cumulative exports this year through February reached $133.25 billion, up 31.3 percent from a year earlier. The pace exceeds last year’s record performance, when annual exports surpassed $700 billion for the first time.

Domestic demand has also shown signs of improvement. The consumer sentiment index rose for two consecutive months from January, marking a shift from last year’s sluggish trend. The Bank of Korea recently forecast a recovery in private consumption, citing the cumulative effects of interest rate cuts, improved corporate earnings and upbeat stock and consumer sentiment.

The year is seen as pivotal in determining whether the Korean economy, which grew only 1 percent last year, can climb back to growth in the 2 percent range. The first quarter in particular serves as a key test of whether Korea can break free from the entrenched low growth of the previous year. With both exports and consumption off to a strong start, expectations for the March data had been high.

Tax revenue is another closely watched factor. Market projections suggest that roughly 10 trillion won ($6.8 billion) in excess tax revenue could be generated. Once corporate tax filings conclude at the end of March, a clearer picture will emerge. If sufficient additional revenue is secured, the government could draw up a supplementary budget without issuing additional government bonds to support the economy.

A handout photo made available by Iran's Islamic Revolutionary Guard Corps (IRGC)'s official website Sepahnews on Feb. 17, 2026,e shows IRGC conducting a military drill in the Strait of Hormuz, in the Persian gulf, southern Iran. The IRGC launched a large-scale exercise in the Strait of Hormuz, state media reported. The drills follow an increased US military presence in the Middle East amid heightened regional tensions. [EPA/YONHAP]

The geopolitical conflict in the Middle East, in this sense, serves as one of the most unwelcome and unforeseen variables in the equation. The worst-case scenario would be prolonged instability in oil prices and exchange rates. A weaker won can offer short-term benefits to exporters, but when coupled with soaring oil prices, it may trigger a “double shock” by driving up import prices and stoking domestic inflation.

“If rising energy and essential goods prices push up perceived inflation, the recovering consumer sentiment could drop again,” said Kim Sang-bong, a professor of economics at Hansung University.

Trade conditions have also shifted abruptly since late February. After the U.S. Supreme Court put the brakes on President Trump's use of the International Emergency Economic Powers Act to impose reciprocal tariffs, Trump invoked Section 122 of the Trade Act to declare a 15 percent global tariff instead. Washington has also been pressuring trading partners by invoking Section 301 of the Trade Act and sector-specific tariffs following investigations into unfair trade practices.

Seoul has moved to strengthen risk management. Led by Deputy Prime Minister Koo Yun-cheol, authorities launched a joint emergency response team. On Monday, officials convened an emergency meeting of relevant ministries at the Government Complex Seoul to assess financial and real economy conditions related to the developments in the Middle East. The government will analyze developments in the region in real time and take action in accordance with contingency plans if needed.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JANG WON-SEOK [[email protected]]