70% of crude oil comes from the Middle East! With the Strait of Hormuz "blocked," South Korea enters "crisis mode."

The ongoing Middle East conflict continues, and South Korea is now upgrading its economic response measures to a crisis level.

On Wednesday, March 24, South Korean Prime Minister Kim Min-seok warned, South Korea must strengthen its proactive overall response mechanism and prepare for the worst-case scenario. He stated:

In view of the possibility that the situation may persist for a long time, it is necessary to further strengthen a proactive, whole-government response mechanism, including preparations for the worst scenario. The government will react with the utmost urgency according to the severity of the situation.

Mechanistically, the South Korean government will establish a cross-departmental “Emergency Economic Task Force” led by the Prime Minister, meeting twice a week initially. Meanwhile, the Presidential Office will also set up a separate emergency economic analysis room, forming a dual-track coordination structure.

Kim Jong-un also urged the swift passage of a supplementary budget, saying it is “not a choice, but a necessity” to protect the economy from risks.

Previously, the South Korean government and the ruling party had agreed on a supplementary budget of about 25 trillion won (approximately 16.7 billion USD) to buffer the impact of rising energy costs and stabilize supply chains through fiscal measures.

25 Trillion Won Supplementary Budget: No New Debt, Focus on Livelihoods

The South Korean government and the ruling party reached consensus on the additional budget plan last Sunday.

The budget totals about 25 trillion won, sourced from tax revenues rather than new government bonds, to avoid upward pressure on bond yields. Main areas of fiscal support are expected to include: buffering the impact of high energy costs on households and businesses, assisting vulnerable groups, and stabilizing supply chains.

Earlier this month, President Lee Jae-myung instructed his team to accelerate drafting the budget, with official details expected to be announced soon.

Citigroup economist Jin-Wook Kim estimates that the 25 trillion won proposal is equivalent to around 0.88% of Korea’s GDP and may boost economic growth by 0.18 to 0.35 percentage points over the next four quarters.

However, Citigroup had already lowered its forecast for Korea’s 2026 economic growth by 0.1 percentage point to 2.2% before news of the supplementary budget.

Economists note that the stimulus measure may provide moderate support for growth but could also further heighten inflation risks amidst the current volatility.

Energy Price Controls: First Fuel Price Cap in Almost Thirty Years

Beyond the supplementary budget, since the Iran situation became turbulent, the South Korean government has launched several emergency measures, including implementing a fuel price cap for the first time in nearly 30 years to curb inflation pressure from surging oil and gas prices.

Data from Citigroup shows that without policy intervention, wholesale gasoline prices could rise sharply—from about 1,723 won per liter earlier this month to around 2,050 won per liter in late March. Citigroup expects the government may further cut fuel taxes to offset the impact.

About 70% of South Korea’s crude oil imports come from the Middle East, making its economy particularly sensitive to prolonged supply disruptions.

If supply shocks continue, their impact will ripple upstream through the industrial chain, affecting industrial raw materials like naphtha and urea—raising production costs, weakening export competitiveness, and shrinking domestic demand.

Reports say oil shortages are already threatening the supply of essential consumer products such as garbage bags and instant noodles in Korea; the energy shock is quickly spreading to the consumer end.

Risk DisclaimerThe market has risks and investment requires caution. This article does not constitute personal investment advice and does not take into account the individual investment goals, financial situation, or needs of any specific user. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investment decisions based on this article are at one's own risk.