South Korea's energy cost crisis has exploded in all aspects! In March, the import prices soared by 16.1% compared to the previous month, marking the largest increase in 28 years.

South Korea's import prices have risen to the largest increase in nearly 30 years, highlighting the cost pressure caused by the Iran war pushing up oil prices and dragging down the Korean won, which is spreading to the entire economy. Data released by the Bank of Korea on Wednesday showed that import prices in March soared by 16.1% compared to the previous month, the fastest monthly increase since January 1998, with a year-on-year increase of 18.4%. Export prices also rose by 16.3% compared to the previous month, highlighting the inflation pressure prevalent in trade flows. This surge reflects the sharp increase in global oil costs and the weakening of the Korean won. The Bank of Korea stated that the price of Dubai crude oil in March nearly doubled compared to the previous month, averaging $128.52 per barrel, while the Korean won depreciated by about 2.6% against the US dollar during the same period. Raw materials led the surge, with import prices of crude oil and other mining products increasing by over 40% compared to the previous month. Petroleum-related products, including naphtha and aviation fuel, also saw significant increases, exacerbating the cost pressure on manufacturing companies. Lee Moon-hee, head of the price statistics team at the Bank of Korea, stated, "The outlook for consumer inflation may be affected by various factors, including the progress of the Middle East conflict and the effectiveness of government price stability measures. If the war extends in duration, high oil prices and potential disruptions in raw material supplies could spread to a wider range of economic sectors, further increasing upward pressure on consumer prices." Inflation expectations have started to rise. The International Monetary Fund (IMF) maintained its growth forecast for South Korea in 2026 at 1.9% in its latest World Economic Outlook, slightly above the average level of advanced economies; at the same time, it forecasted that inflation this year would rise to 2.5%, higher than the previous estimate of 1.8%. Prior to this, the Bank of Korea had issued warnings about rising price pressures, stating that inflation rates could exceed its forecast of 2.2% for 2026 and accelerate into the range of 2.5% to 3%; while economic growth could be lower than the previous expectation of 2%. With the rising energy costs and strong semiconductor demand, export prices have also surged. Prices of computers, electronics, and optical products have risen along with petroleum products, reflecting cost pass-through effects and the resilience of global tech demand. The sharp increase in import costs is expected to transmit to consumer inflation with a lag, making policy prospects more complicated. This price surge comes as authorities prepare to provide fiscal support to alleviate the economic impact of the Middle East crisis. If the central bank is forced to raise rates to deal with increasing price pressures, the risk of policy divergence will increase. Considering that interruptions in the supply of raw materials are unlikely to be completely resolved in the short term, Lee said in an interview with reporters, "Due to the high uncertainty in the US-Iran negotiations, it is currently difficult to predict the direction of import prices in April."