Middle East Conflict Escalates; Korea Must Prepare for Economic, Security Fallout

The fallout from the "retaliation war" following the death of Iran's Supreme Leader Ayatollah Khamenei in a surprise U.S.-Israeli airstrike is rapidly spreading across the Middle East. Iran's Islamic Revolutionary Guard Corps (IRGC) has declared "the largest-ever retaliation," announced a blockade of the Strait of Hormuz, and launched indiscriminate attacks on U.S. military bases in Qatar, Kuwait, the United Arab Emirates, and Bahrain. Lebanon's pro-Iran militant group Hezbollah has also joined Iran's retaliatory campaign. After three U.S. service members were killed during military operations, President Donald Trump declared on the 1st, "We will avenge their deaths," adding, "This will continue until all our objectives are achieved."

As the Middle East descends into a quagmire of retaliation, Korea's economy faces a megaton-scale crisis. Korea depends on the Middle East for approximately 70% of its crude oil and 20% of its liquefied natural gas (LNG). Of this, 95% passes through the Strait of Hormuz. Although the strait has not been completely blockaded yet, global markets are projecting that international oil prices could exceed $120-130 per barrel due to the Middle East situation. The government claims oil reserves and LNG stockpiles are sufficient, but a prolonged war changes the calculus.

President Trump indicated the attack on Iran would last "up to about four weeks," but the possibility that Iran could use the Hormuz blockade as leverage to induce a "prolonged war of attrition" cannot be ruled out. In such a scenario, shipping costs could surge up to 80%, Korea would face severe power shortages and logistics disruptions, and exports—which had been cruising along with a 29% surge in February thanks to the semiconductor boom—could be hobbled. If the escalation amplifies foreign exchange and stock market volatility, escaping low growth becomes a distant prospect. The impact on security cannot be ignored either. The Iran crisis could serve as a pretext for North Korea to double down on nuclear development, or the U.S. concentration of strategic assets in the Middle East could loosen the security posture in Northeast Asia.

Global uncertainty has reached a peak due to the rapid changes in the Middle East. Now is the time to keep all possibilities open and establish airtight response plans for every scenario. The government has moved swiftly to activate a 24-hour diplomatic and security crisis response system focused on protecting Korean nationals abroad, along with market monitoring and stabilization measures, but short-term responses alone offer no reassurance. The government must prepare thoroughly for a prolonged war that could deliver a fatal blow to the economy and security by maintaining close communication with businesses, financial institutions, and the United States, its ally.