South Korea, which relies heavily on Middle Eastern energy, could face a shock comparable to the 1970s oil crisis if the conflict drags on, industry officials warned.
According to the industry on March 3, the attacks sent international oil prices and natural gas prices in Asia and Europe sharply higher. On ICE Futures, Brent crude for May delivery settled at $77.74 a barrel, up 6.7% from the previous session.
Brent briefly climbed to $82.37, up 13%, its highest level in more than a year since January last year. On the New York Mercantile Exchange, WTI for April delivery settled at $71.23 a barrel, up 6.3%. WTI rose as high as $75.33, up 12%, the highest since June last year.
Freight rates surged alongside crude. A VLCC (very large crude carrier) Middle East-to-East Asia (MEG–China) route indicator obtained by Aju Business Daily showed the Worldscale (WS) rate at 410.44 as of March 2. The corresponding daily time charter equivalent (TCE) was calculated at $423,736.
That is nearly double the level just before the war on Feb. 27 (WS 224.72; TCE $218,154) and more than five times January’s level (WS 96.12; TCE $78,793).
Worldscale is a standard benchmark used to settle international tanker freight. Rates below 100 are generally seen as weak and above 100 as strong. A move above 400 is viewed as an extreme reading reflecting war risk, not just a strong market.
The market is increasingly concerned that tanker freight could rise more than tenfold from prewar levels as Iran’s blockade of the Strait of Hormuz has effectively become a reality. Marine insurance, a major component of shipping costs, has continued to climb sharply.
Analysts said the fallout could be significant for South Korea because the country depends on the Middle East — where the Strait of Hormuz is located — for about 70% of its imported crude and up to 30% of its natural gas.
If higher oil prices are compounded by rising transport costs, refiners’ crude import costs would jump, likely feeding through to higher prices for petroleum and petrochemical products and higher power generation costs, squeezing profitability across industries.
The government has said it will respond by releasing stockpiled oil and securing alternative supplies. It holds crude reserves equivalent to about 208 days of use and says it can handle short-term disruptions.
But a prolonged closure of the Strait of Hormuz could change the picture, with critics warning that stockpile releases alone may not fully ease supply anxiety. The Korea International Trade Association said using alternative routes instead of the strait could lift freight costs by an additional 50% to 80% and extend shipping time and customs procedures by up to five days. In the past, war-risk insurance premiums in the region have been marked up by as much as sevenfold.
Oh Hyun-seok, a professor of international trade at Keimyung University, said, “The government says it still has room with its stockpiles, but it is not time to be optimistic.” He added, “If the strait is blocked, oil import diversification is needed, and in the short term, tax adjustments such as easing fuel taxes are needed to reduce the burden on companies and consumers.”
* This article has been translated by AI.
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