June 19, 2025
SEOUL – With the fiercest confrontation yet between Israel and Iran underway — and early signs of a shift from escalation to diplomacy — South Korea must remain vigilant to the fast-moving dynamics of the Middle East and their far-reaching impact on the global economy.
What began on June 13 as targeted Israeli airstrikes against Iran’s nuclear and military infrastructure has quickly escalated into a conflict of unprecedented intensity. “Operation Rising Lion,” as Israeli officials call it, has struck key facilities, including South Pars, Iran’s largest gas field, and oil processing plants. Iran responded with a wave of missiles and drones aimed at Israeli cities and civilian infrastructure, transforming a simmering regional rivalry into a volatile war of attrition.
Israeli Prime Minister Benjamin Netanyahu has cast the campaign as a preemptive strike against a regime bent on acquiring nuclear weapons. Tehran, for its part, has vowed continued retaliation unless Israel halts its attacks.
Though the fighting is geographically remote, its consequences are not. For energy-reliant economies like South Korea, the stakes are particularly high. Iran has again raised the specter of closing the Strait of Hormuz, through which roughly 20 percent of the world’s seaborne oil, about 20 million barrels per day, flows. For South Korea, more than 70 percent of crude imports and a third of liquefied natural gas transit through this chokepoint.
While a full blockade is unlikely, even partial disruption could wreak havoc. Oil prices, already jittery, would surge with some analysts warning of spikes to $130 a barrel, levels not seen since the 1970s oil shocks. That would ripple across South Korea’s economy, raising fuel and production costs, squeezing consumers and threatening a return to stagflation.
The Lee Jae-myung administration, still early in its tenure, faces a test of economic stewardship. While Seoul has stockpiled six months’ worth of energy reserves and drafted contingency plans, these now require urgent revision. Diversifying energy suppliers, intensifying diplomatic outreach to key producers and stabilizing vulnerable supply chains must become immediate priorities.
If the Middle East conflict escalates further, imported inflation could blunt the effect of South Korea’s supplementary budgets meant to support households and businesses. Exporters, already grappling with global uncertainty, now face added volatility in shipping costs and fuel prices.
Historically, Iran’s threats to close Hormuz have been more posturing than policy. But the reemergence of this rhetoric signals a deeper unraveling of regional stability. Israeli decision-making now seems driven more by hard security imperatives than by diplomacy, raising the risk of prolonged instability across the Middle East.
There is, however, a glimmer of de-escalation. US President Donald Trump abruptly departed the G7 summit in Canada on Monday to deal with the crisis. After initially refusing to endorse the summit’s joint statement condemning Iran, he reversed course once the language was softened. Trump has since encouraged Vice President JD Vance and Mideast envoy Steve Witkoff to engage with Iran, whose foreign minister, Abbas Araghchi, has signaled a willingness to resume nuclear talks on the condition that the US stay out of Israel’s military campaign.
Tehran’s overtures, conveyed through Qatar, Oman and Saudi Arabia, suggest Iran may be seeking an off-ramp. Brent crude prices, which spiked Friday, fell slightly on Monday in response to the news. But energy markets remain volatile — a reflection of how quickly this conflict could reignite.
Even if diplomacy advances, one misstep could spiral into wider war. For South Korea, the priority must be readiness: not only for energy shocks but for their ripple effects on the won, financial markets and household economies.
This is not merely a distant conflict. It is a high-stakes test of global resilience, one that calls for steady, adaptive leadership in Seoul and beyond.