▪ Military conflict erupted as Israel struck Iran’s nuclear facilities and Iran retaliated.
▪ The conflict once again exposed Middle East geopolitical risks and vulnerabilities in crude oil supply chains.
▪ The following examines the potential impact of Middle East conflict risks on the Korean economy.
▪ Middle East exports in 2024 totaled $19.68 billion (2.9% of Korea’s total exports).
▪ Middle East imports in 2024 totaled $93.15 billion (14.7% of Korea’s total imports).
▪ Trade with Iran has been virtually suspended since the US strengthened sanctions against the country in 2018.
▪ Trade with Israel increased until 2022 following the 2019 FTA agreement and then slightly decreased thereafter.
▪ Risk of international oil price instability
▪ Risk of international maritime supply chain disruption
▪ Analysis divided into cases where deadlock persists versus cases where oil price instability increases.
▪ The analysis results show that the Middle East conflict creates instability in international oil prices and crude oil transport routes, which becomes a risk factor for the Korean economy leading to trade balance/real GDP growth rate deterioration and price instability.
▪ The study examined risks that international oil price and crude oil transport route instability could pose to the Korean economy.
▪ The analysis results highlight fundamental vulnerabilities in the Korean economy: high dependence on oil as energy source and high external dependence for oil supply.
▪ To address these issues, Korea should seek strategies for managing oil import and supply fluctuation risks.