Oil Prices Jump on U.S.-Israel-Iran War, Boosting Interest in Hybrids and EVs

The war involving the United States, Israel and Iran has sent international oil prices sharply higher, fueling consumer anxiety. If volatility persists, demand is likely to shift from internal-combustion vehicles to hybrids and electric vehicles. Some in the industry say eco-friendly models could account for more than half of Hyundai Motor Group’s domestic sales this year.

According to industry officials on Tuesday, Dubai crude futures traded on the New York Mercantile Exchange closed at $80.39 a barrel the previous day, up 5.04% from the prior session. That was a 12.7% jump in three trading days from Feb. 27, just before the war began, when it was $71.81 a barrel. After holding a steady $66 to $68 a barrel on average in February, prices have surged more than 5% a day since the Strait of Hormuz was blocked following U.S. airstrikes on Iran, the report said.

Experts said a prolonged conflict could push oil to around $130 a barrel. JPMorgan forecast that if Iran’s blockade of the Strait of Hormuz drags on and disrupts maritime transport for three to four weeks, oil would rise above $100 a barrel. In that case, gasoline now priced at about 1,739 won per liter would climb to 1,850 to 1,900 won, an increase of 6.3% to 9.4%.

If high oil prices persist, demand is likely to grow for hybrids, plug-in hybrids and EVs. An auto industry official said it is difficult to predict a broad shift in the market based on short-term oil forecasts because vehicle replacement cycles typically run five to 10 years. Still, the official said, if high prices continue amid a rise in localized conflicts globally, consumers facing higher living costs will gravitate toward fuel-efficient hybrids or EVs.

Sales data already show a strong shift. Hyundai sold 97,216 vehicles in South Korea in January and February, including 35,897 hybrids and EVs, or 36.9% of the total, up 20% from a year earlier. Kia sold 85,107 vehicles domestically over the same period, with eco-friendly models totaling 48,416 — 30,300 hybrids and 18,166 EVs — for a 56.9% share, a 42.1% increase from a year earlier. If the trend holds, the share of eco-friendly vehicles — now about 30% to 40% of new registrations — is expected to top 50% within the year.

The high upfront cost, often cited as the main drawback of eco-friendly vehicles, is also easing as battery prices fall. To compete with internal-combustion vehicles on price, EV battery costs need to drop to around $100 per kilowatt-hour. Germany’s electrive.com reported that EV battery prices fell from $115 per kWh at the end of last year to $100 this year, and are projected to reach $69 by 2030. Tesla, BMW, Hyundai Motor Group and Volvo have cut prices on major EV models by about 13% to 20% this year as battery-pack costs declined.

* This article has been translated by AI.

Han Jiyeon