Korea Imposes Oil Price Caps as Iran Vows Continued Hormuz Blockade

South Korea's maximum price controls on petroleum products took effect on the 13th in response to soaring international oil prices caused by Iran's blockade of the Strait of Hormuz. Refiners' maximum supply prices were capped at 1,724 won per liter for regular gasoline, 1,713 won for diesel, and 1,320 won for kerosene.

Iran's new Supreme Leader Mojtaba Khamenei declared in his first official statement the previous day that "we must continue to use the leverage of blocking the Strait of Hormuz as a means to pressure the enemy (the United States and Israel)." He reaffirmed Iran's intent to wage a prolonged confrontation with the U.S. and Israel by holding hostage the strategic chokepoint through which 20% of global crude oil shipments pass.

Influenced by his remarks, Brent crude futures for May delivery closed at $100.46 per barrel on the ICE Futures Exchange in London that day. This marks the first time Brent crude has exceeded $100 at closing since August 2022—a span of three years and seven months.

The government's decision to impose petroleum price controls for the first time in 30 years since oil price liberalization in 1997 was unavoidable amid the crisis of uncontrollable oil shock waves spreading from the Iran war. With rising fuel costs placing heavy burdens on farmers, small business owners, and ordinary citizens alike, freight transporters and industrial sites are urgently appealing about direct damages from surging fuel prices.

The greater concern is that contrary to U.S. President Donald Trump's bold claims of ending the war quickly, the Iran situation increasingly appears headed toward prolonged conflict, meaning elevated oil prices could persist for an extended period. The petrochemical industry, which has reduced operating rates by 10-30%, warns that continued disruption to crude oil and naphtha supplies due to the Hormuz blockade through month's end could trigger "chain shutdowns."

While the government is rushing to prepare an early supplementary budget to prevent the oil price surge from contracting the real economy, temporary fiscal measures and short-term remedies like petroleum price caps have their limits. Although the Iran situation could end quickly, contingency plans must now be prepared across industrial sectors and various scenarios, accounting for a prolonged oil shock.

Practical cost-reduction measures such as expanding fuel tax cuts and deferring customs duties should be actively considered. Above all, an emergency response system at the pan-government level must be swiftly activated, forming a "one team" approach with businesses to ensure thorough management of energy supply and demand, financial market stability, and price controls. Now is the time to devise ultra-strong measures comparable to those taken during the oil shocks of the 1970s and 1980s.