Seoul: A ceasefire agreement between the United States and Iran and plans to reopen the Strait of Hormuz have eased one of the biggest external risks facing South Korea's economy, but oil prices could take time to stabilize and return to pre-war levels, experts said Monday.
According to Yonhap News Agency, U.S. President Donald Trump announced Sunday that Washington and Tehran have reached a peace deal aimed at ending their monthslong conflict, stating that the strategically vital Strait of Hormuz will reopen once the agreement is formally signed later this week. This announcement has led to a retreat in international oil prices, with Brent crude falling to around US$87 per barrel and West Texas Intermediate (WTI) dropping to around US$84 per barrel, down from levels that had at one point approached US$100 during the conflict.
The development is especially significant for South Korea, which relies heavily on imported crude oil, with approximately 70 percent coming from the Middle East and much of it transported through the Strait of Hormuz. Earlier this year, South Korea had to seek alternative crude supplies and shipping routes due to the conflict.
Experts indicate that the reopening of the strait could reduce the risk of supply shortages, ease shipping delays, and lower war-risk insurance premiums and freight rates, potentially exerting further downward pressure on oil prices. South Korea's refining and petrochemical industries are expected to benefit significantly, as refiners depend on Middle Eastern crude, while the petrochemical sector relies on naphtha imported largely from the Gulf region. Lower crude prices would eventually reduce import costs and improve margins across energy-intensive industries.
However, industry officials and experts caution that it may take some time before consumers experience the impact of lower oil prices. Changes in international oil prices typically take two to three weeks to be reflected at domestic gas stations due to shipping times, refining processes, and inventory cycles. Despite recent declines, domestic fuel prices have remained above the 2,000-won mark following the outbreak of the Middle East conflict.
According to the Korea National Oil Corporation's Opinet system, the average nationwide gasoline price during the second week of June fell 0.5 won from the previous week to 2,009.9 won per liter, while diesel prices slipped 0.3 won to 2,004.8 won per liter. Furthermore, the normalization of physical supplies could take considerably longer, as ships carrying crude oil have been stranded in the Persian Gulf for more than three months, and damaged production facilities may require additional time to resume normal operations.
The strong Korean won-dollar exchange rate poses another challenge, as the won has remained near the 1,500-per-dollar level in recent months, raising import costs and potentially offsetting some benefits from lower crude prices. Industry officials are cautious about the durability of the ceasefire, leading South Korean refiners to adopt a wait-and-see approach before increasing imports of Middle Eastern crude. Having spent months diversifying supply sources amid the conflict, refiners are hesitant to quickly reverse course until there is greater confidence in the security of shipping routes through the strait and the full implementation of the agreement.
"We are making efforts to diversify crude oil imports, but eased tensions in the Middle East would help secure stable crude supplies," an industry official said. "What matters most is achieving a lasting resolution to the U.S.-Iran conflict beyond a ceasefire agreement."