A prolonged surge in oil prices could weaken South Korea’s economy, fuel inflation and erode its trade surplus, adding to risks for U.S. investors and multinational companies exposed to Asian manufacturing and consumer demand. In a downside scenario released October 22, South Korea’s National Assembly Budget Office warned that an extended disruption to Middle Eastern oil supplies could undermine growth through 2027 while raising costs across the economy.
The report, 2027 Economic Outlook, examines a scenario in which stalled negotiations between the United States and Iran, attacks by Yemen’s Houthi rebels on alternative shipping routes, and stronger winter demand for heating oil drive crude prices above $110 a barrel in the fourth quarter of 2026. Prices would remain between $90 and $110 a barrel through the first half of 2027 before falling into the $80s in the second half.
Under those conditions, South Korea’s real gross domestic product growth in 2027 would be 0.16 percentage point lower than in the baseline forecast, which assumes an average annual oil price of about $76.70 a barrel. Consumer-price inflation would be 0.32 percentage point higher, while the country’s trade surplus would shrink by an estimated $17 billion.
The projections highlight South Korea’s vulnerability to energy-market shocks. More than 70% of its crude oil imports come from the Middle East, making the country particularly sensitive to supply disruptions that can raise industrial costs, squeeze corporate margins and reduce household purchasing power.
The economic effects would begin this year. Under the downside scenario, South Korea’s 2026 growth rate would be 0.06 percentage point lower than the baseline projection, inflation would be 0.12 percentage point higher, and the trade surplus would decline by $6 billion.
The budget office said renewed deterioration in the Middle East conflict and a sharp increase in international oil prices have reduced the likelihood of its earlier scenario for stabilizing energy prices.
Diplomatic developments remain a major source of uncertainty. An agreement between Washington and Tehran, along with international mediation efforts, could ease supply concerns and moderate oil prices. Further escalation, by contrast, could prolong pressure on energy-importing economies.
For global businesses and investors, the duration of the oil shock will be critical. Persistently high prices could weigh on South Korean industrial output and domestic consumption while complicating the fight against inflation, with broader implications for regional trade, corporate earnings and global supply chains.
