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Oil-fueled inflation balloons above 3% for first time in 26 months

Published: 03 Jun. 2026, 07:00

Car owners pump gas at a gas station in Seoul on April 12. [YONHAP]

Oil-driven inflation from tensions in the Middle East appears to be hitting Korean consumers hard as it pushes inflation above 3 percent for the first time in 26 months.

Prices are rising not only for petroleum products such as gasoline and diesel but also for services affected by higher fuel costs, including international airfares and laundry services. Economists warn that rising oil prices could continue spreading through the broader economy in the coming months.

Last month, consumer prices rose 3.1 percent compared to a year earlier, according to a report from the Ministry of Data and Statistics released Tuesday. For the first time since March 2024, inflation has surpassed the 3 percent mark. The figure represents a significant jump from April, when on-year inflation stood at 2.6 percent.

The surge was driven largely by energy prices.

Industrial goods prices, which include petroleum products, rose 4.2 percent on year. Petroleum product prices jumped 24.2 percent. The surge marked the fastest increase since energy prices surged following Russia's invasion of Ukraine in July 2022.

Gasoline prices rose 23.1 percent, while diesel prices climbed 33.3 percent. Together, gasoline and diesel prices contributed 0.92 percentage points to the overall inflation rate.

Higher oil prices have also spread to travel and transportation costs.

Aircrafts are taking off from the Incheon International Airport on April 16. [NEWS1]

International airfares surged 33.5 percent as airlines passed on higher fuel surcharges. The jump marked the largest increase since related statistics began being compiled in 1995. The cost of overseas package tours rose 26.3 percent and rental car fees increased 25.7 percent.

Other goods and services that rely heavily on petroleum-based materials also became more expensive. Housing repair materials rose 5 percent, engine oil replacement services increased 14 percent and laundry fees climbed 11.3 percent.

As a result, service prices rose 2.8 percent on year, contributing 1.56 percentage points to overall inflation. It was the highest service-sector inflation rate since December 2023.

The government has introduced measures such as fuel tax cuts and price controls on petroleum products, but the steps have not been enough to fully offset the impact of rising energy costs.

The Ministry of Finance and Economy estimates that the measures reduced May's inflation rate by about 0.6 percentage points, meaning that without the government measures, consumer inflation could have reached 3.7 percent.

Beef imported from the United States is displayed at a retail market in Seoul on Dec. 26, 2025. [NEWS1]

Food prices also resumed their upward trend.

Prices for agricultural, livestock and fishery products rose 2.2 percent on year, reversing three months of declines. Vegetable prices fell 4.9 percent but livestock and seafood prices rose 5.8 percent and 5 percent, respectively.

Egg prices increased 10.2 percent as the impact of highly pathogenic avian influenza continued to disrupt supply. Imported beef prices rose 7.6 percent amid the weak won.

Seafood prices also climbed, particularly for products that rely heavily on imports. Prices of cutlassfish rose 15.1 percent, yellow croaker increased 14.6 percent and mackerel gained 5.1 percent.

Core inflation, which excludes agricultural products and petroleum products, rose 2.5 percent in May.

A shopper browses produce at a large grocery store in Seoul on Aug. 11, 2025. [YONHAP]

The living-cost index, however, climbed 3.3 percent. The index tracks 144 frequently purchased items that account for a large share of household spending.

The gap suggests consumers are feeling greater price pressures than the figures alone indicate.

"We will need to monitor how much of the increase in global oil prices is passed on to processed food products and restaurant prices," said Lee Doo-won, a senior official at the Data Ministry.

Analysts also point to the won's weakening against the dollar as an additional source of inflation pressure.

A man passes by a board displaying exchange rates at a currency exchange booth in central Seoul on May 28. [NEWS1]

A weaker currency raises import costs, which in turn pushes up prices for raw materials and intermediate goods. Those higher costs are eventually passed on to consumers.

The Bank of Korea (BOK) held a meeting on Tuesday to review inflation trends and warned that the impact of higher oil prices could gradually spread to other sectors of the economy.

"As the impact of rising oil prices expands to other areas of the economy, inflation is expected to remain in the 3 percent range for the time being," said Lee Ji-ho, director of the research department at the BOK. "The increase in living costs has placed a heavier burden on vulnerable households that typically spend a larger share of their income on essential goods."

Persistent inflation could also increase pressure on policymakers to raise interest rates.

"Much of the recent growth has been concentrated in sectors such as semiconductors. For many ordinary households, however, the economy still feels weak," said Seok Byoung-hoon, an economics professor at Ewha Womans University. "If inflation continues to rise and is followed by interest-rate hikes, households could face even greater hardship."

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 KIM YEON-JOO [[email protected]]