South Korea's Koo: Top priority is responding to Mideast risk

South Korea’s Finance Minister Koo Yun-cheol has prioritized mitigating economic risks arising from the Middle East crisis, announcing a comprehensive response involving policy tools, fiscal measures, and market interventions. The government will activate an emergency economic response system and consider a supplementary budget to cushion the impact of volatile energy prices and supply chain disruptions according to government announcements. Recent U.S.-Israeli strikes on Iran and retaliatory actions have triggered sharp fluctuations in financial markets, with the Korean won depreciating against the U.S. dollar and domestic fuel prices surging as reported.

To stabilize the economy, authorities plan to implement a temporary cap on retail fuel prices this week, alongside measures to prevent hoarding and price gouging of petroleum products. Subsidies for diesel used by freight trucks, buses, and taxis are also under consideration according to the government. The government has emphasized a “zero-tolerance” approach to collusion among oil refiners and gas stations, with public notices to deter speculative practices as reported.

South Korea’s heavy reliance on imported energy—70% of crude imports transit the Strait of Hormuz— heightens vulnerability to regional disruptions. However, the nation maintains strategic oil reserves covering 208 days of consumption, providing a buffer against short-term shocks. The government and Bank of Korea are prepared to expand a 100 trillion won ($68 billion) market stabilization program, including emergency bond purchases, to reinforce financial stability.

Economists note that South Korea has fiscal flexibility to deploy up to 20 trillion won in resources without increasing debt, with potential allocations for fuel tax cuts, price caps, and targeted support for low-income workers and transport sectors according to analysis. These measures aim to curb inflationary pressures and safeguard industries amid prolonged geopolitical uncertainty.