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S. Korean industries monitoring possible fallout from escalating Middle East tensions

14 April 2024 22:50 (UTC+04:00)
S. Korean industries monitoring possible fallout from escalating Middle East tensions

Refiners, shippers and other South Korean industries on Sunday remained vigilant against the possible fallout from heightened tensions in the Middle East following Iran's recent missile and drone strikes against Israel, Azernews reports, citing Yonhap.

Oil refining industry observers said they expected oil prices to rise in the foreseeable future due to the renewed conflict, which would lead to increases in domestic petroleum product prices.

Experts said the situation could result in adverse effects if such geopolitical risks persist in the long term.

An official at the Korea Petroleum Association said countries like South Korea, which do not produce oil but import crude oil for refining and retail distribution, are at risk of experiencing significant decreases in margins and demand from related products.

The petrochemical industry expert said the sector may not see immediate visible impacts, as it has been facing sluggish demand due to oversupply from China.

Market players, however, are closely monitoring whether the situation could lead to an increase in prices of basic raw materials, such as naphtha, the expert added.

Container shippers, such as industry leader HMM Co., are concerned about the possibility of the Strait of Hormuz being blocked following attacks. The strait is a frequent route for HMM's expanding bulk carrier operations.

"As of now, there are currently no immediate actions being taken, but we are closely monitoring the situation as it could inevitably have a significant impact on the shipping industry," an official at the Korea Shipowners' Association said.

A representative in the shipbuilding industry said the sector anticipates impacts from rising oil prices and increased shipping freight rates.

The airline industry, meanwhile, expected to remain largely unaffected.

Korean Air Co., which operates flights between Incheon and Tel Aviv, the only direct route from South Korea to the Middle East provided by the domestic aviation industry, has suspended the route for over six months since the outbreak of the Israel-Hamas conflict in October of last year.

Hyundai Motor Co. and Kia Corp., market leaders in Israel in terms of sales, also reportedly expect a limited impact, as they do not have manufacturing or research facilities there.

The automakers are, however, closely monitoring the situation due to possible disruption in sales if tensions persist.


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