South Korea Shifts to Crisis Mode as Iran Oil Shock Intensifies

Kim Min-seok Photographer: Woohae Cho/Bloomberg Photo by Woohae Cho /BloombergArticle content(Bloomberg) — South Korea is stepping up contingency planning for a worst-case Middle East scenario, with Prime Minister Kim Min-seok warning that the government must strengthen its preemptive response systems as the conflict shows signs of persisting.Sign In or Create an AccountEmail AddressContinueor View more offersArticle content“With the situation likely to be prolonged, there is a need to further strengthen a preemptive, whole-of-government response system, including preparations for worst-case scenarios,” Kim told reporters Wednesday. “The government will respond with utmost urgency in line with the gravity of the situation.” Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentThe government will establish an emergency economic task force led by the prime minister that will operate as a cross-ministerial “one team,” Kim said. The group will meet twice a week for the time being to coordinate its response, while a separate emergency economic situation room will be established at the presidential office, he added. Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentKim also urged swift passage of a supplementary budget, calling it “not a choice but a necessity” to shield the economy from risks. The move underscores how Seoul, heavily exposed to energy imports, is shifting into crisis mode as oil prices surge and supply risks intensify, with the Strait of Hormuz effectively closed to most traffic.Article contentThe government and ruling party agreed on Sunday to compile a roughly 25 trillion won ($16.7 billion) supplementary budget to be funded by stronger-than-expected tax revenues rather than through new bond issuance, as it seeks to support the economy without putting upward pressure on bond yields. Article contentThe Korean won has slumped almost 4% this month to number among the worst performers in Asia. The benchmark Kospi has shed about 10%.Article contentArticle contentThe fiscal support is expected to focus on cushioning the impact of higher energy costs, supporting vulnerable households and stabilizing supply chains. The government is expected to announce the details of the extra budget soon, after President Lee Jae Myung urged his team earlier this month to draw up a swift draft of the package. Article contentSince the Iran turmoil, Seoul has already rolled out emergency measures, including imposing a fuel price cap for the first time in nearly three decades, as part of efforts to contain inflation pressures stemming from surging oil and gas prices.Article contentRead Also: Oil Crunch Threatens South Korea’s Garbage Bag, Ramen SupplyArticle contentEconomists say the stimulus could provide a modest growth boost, but may also add to inflation risks in an already volatile environment.Article contentCitigroup Inc. economist Jin-Wook Kim estimates the proposed 25 trillion won package comes to about 0.88% of gross domestic product, with the potential to lift growth by 0.18 to 0.35 percentage point over four quarters. Before news of the extra budget came to light, Citigroup had lowered its growth forecast for 2026 by 0.1 percentage point to 2.2%.Trending Posthaste: Canada's troubled housing market just got hit with another headwind News JPMorgan sees 'national security risk' in old grid networks PMN Business Despite growing financial pressures, Canadians are still reliably paying their mortgages Mortgages Smith calls for new southbound pipelines, says U.S. could call 'first dibs' on Canadian oil exports Oil & Gas Oil and gas supply chain is about to snap, warns energy economist Peter Tertzakian Oil & Gas Article contentWithout policy intervention, wholesale gasoline prices could jump sharply, potentially rising to about 2,050 won per liter by late March from about 1,723 won earlier this month, Citi said, adding the government is likely to cut fuel taxes to help offset the shock.Article contentSouth Korea imports about 70% of its crude oil from the Middle East, leaving the economy particularly vulnerable to prolonged disruptions. A sustained supply shock could ripple through industrial inputs such as naphtha and urea, raising production costs, weakening exports and squeezing local demand.Article content(Updates with currency and stock market moves in sixth paragraph.)Article contentShare this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Posthaste: Canada's troubled housing market just got hit with another headwind News JPMorgan sees 'national security risk' in old grid networks PMN Business Despite growing financial pressures, Canadians are still reliably paying their mortgages Mortgages Smith calls for new southbound pipelines, says U.S. could call 'first dibs' on Canadian oil exports Oil & Gas Oil and gas supply chain is about to snap, warns energy economist Peter Tertzakian Oil & Gas