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Economic think tank states that oil prices are unlikely to return to pre-Iran war levels

Published: 02 Apr. 2026, 18:16 Updated: 02 Apr. 2026, 18:18

An employee fuels a vehicle at a gas station in Seoul on March 30. [NEWS1]

Global oil prices are unlikely to return to pre-Iran war levels under any scenario of Middle East tensions and could climb as high as $174 per barrel in the event of a wider conflict, according to the Korea Institute for International Economic Policy (KIEP) on Thursday.

The KIEP, a government-funded think tank that advises the government on global economic issues, presented the outlook in a report released on Thursday.

The KIEP outlined three scenarios: an early cease-fire; a prolonged conflict involving a blockade of the Strait of Hormuz, a key global oil shipping route; and an escalation in which the United States and Iran exchange attacks on oil production facilities in Iran and across the Middle East.

In all cases, oil prices do not return to the pre-Iran war level of $63 per barrel. Even if tensions ease early, the KIEP expects oil prices to reach $90 per barrel by the fourth quarter of next year.

The institute attributed the outlook to delays in restoring damaged energy infrastructure, which would keep supply tight, while efforts to rebuild reserves would push demand higher.

In a scenario involving a prolonged conflict and a blockade of the Strait of Hormuz, oil prices could rise to $117 per barrel by the fourth quarter of next year, based on a projected 10 percent drop in global oil production.

In the worst-case scenario, oil prices could surge to $174 per barrel. The KIEP based this outlook on a situation in which the United States strikes power plants in Iran and Iran retaliates by targeting oil facilities in neighboring countries.

Birds fly near the Jag Vasant vessel transferring liquefied petroleum gas at a port after transiting the Strait of Hormuz amid supply disruptions linked to the U.S-Israeli conflict with Iran in Mumbai, India, on April 1. [REUTERS/YONHAP]

“Oil prices could rise to levels not seen before,” the KIEP said. “Because this estimate is on the low end, the actual impact could be even greater.”

Korea remains highly dependent on Middle Eastern energy imports. The region accounted for 69.1 percent of the country’s crude oil imports last year, and the share for naphtha — a light petroleum product used as a feedstock for petrochemicals such as plastics — stood at 34.4 percent.

“Given that the risk of a prolonged blockade of the Strait of Hormuz is increasing, policy responses are urgent,” the KIEP said. “If oil prices remain between $100 and $117 per barrel for an extended period, Korea’s energy import costs could rise significantly and worsen the country’s trade balance.”

The KIEP recommended diversifying supply sources and preparing emergency response measures.

A map showing the Strait of Hormuz and 3-D printed oil barrels are seen in this photo taken on March 26. [REUTERS/YONHAP]

Korean refiners have also moved to secure alternative crude supplies from the United States and other sources. The government estimates that refiners have secured 50 million barrels of alternative crude this month, based on applications for the strategic petroleum reserve swap program.

Under the swap system, the government lends crude oil from its reserves to refiners, which return the same amount once shipments from the United States or other sources arrive.

U.S. crude takes about 50 days to reach Korea, compared to about 20 days from the Middle East, creating a supply gap that the program aims to bridge.

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 AHN HYO-SEONG [[email protected]]