A prolonged blockade of the Strait of Hormuz could push domestic manufacturing production costs up by more than 10%, according to a warning issued by a state-run think tank.
The scenario assumes international oil prices surge to $150-180 per barrel while liquefied natural gas (LNG) prices spike by 150-200%.
The Korea Institute for Industrial Economics and Trade (KIET) released a report titled "U.S.-Iran Conflict and Hormuz Risk: Supply Chain Scenario Analysis and Implications" on Monday. Researchers divided potential Hormuz blockade scenarios into short-term, mid-term, and long-term timeframes, analyzing corresponding changes in energy input costs and manufacturing production costs.
The short-term supply shock scenario assumes oil prices jump to $105-125 per barrel with LNG prices rising 60-90%, lasting from several days to approximately three weeks. Under this scenario, overall industrial production costs would rise by an average of 4.2%, while manufacturing costs would increase by 5.4%. Coal and petroleum product costs would surge 38.5%, with electricity, gas, and steam production costs climbing 33.4%.
The concern is that even a slightly longer blockade would cause domestic manufacturing costs to rise sharply. Under the mid-term scenario—oil prices at $120-160 per barrel and LNG increases of 100-140% persisting for one to three months—overall industrial production costs would rise by an average of 6.6%. Manufacturing costs would climb 8.6%, with petroleum products jumping 60.4%.
KIET estimated that if supply shocks at the level of $150-180 oil and 150-200% LNG price increases persist beyond three months, creating structural disruption, overall industrial production costs would surge by an average of 9.4%. Manufacturing costs would spike 11.8%, with petroleum products rising 83% and electricity, gas, and steam production costs approaching 77.7%.
"This analysis reflects only the direct input effects of energy prices," KIET warned. "If volume disruptions occur in critical raw materials, actual impacts could expand far beyond these estimates."
"Korea is structurally dependent on the Middle East not only for energy but also for industrial raw materials linked to energy production and refining processes," the institute said. "This exposes us to compound risks where energy supply disruptions simultaneously trigger industrial material shortages."
KIET called for crisis response strategies including energy transition, diversification of raw material procurement, integrated management of energy and industrial supply chains, and preemptive positioning for Middle East reconstruction demand.