Food prices may rise again as Iran tensions rattle supply chains

(Yonhap)

Rising tensions in the Middle East following attacks on Iran by the United States and Israel — and Tehran’s subsequent threats of retaliation — are raising fresh concerns over higher food prices in South Korea.

Industry officials said on Tuesday that major domestic retailers are closely monitoring developments in the region, amid growing fears that Iran could move to block the Strait of Hormuz, a key artery for global oil shipments. Such a move could trigger a spike in crude oil prices and renewed volatility in the won-dollar exchange rate, adding to cost pressures across industries.

Roughly 20 percent of the world’s seaborne crude oil passes through the Strait of Hormuz, making it one of the most strategically vital shipping routes. A closure would likely deliver a significant shock to South Korea’s distribution and manufacturing sectors.

Food companies are particularly vulnerable, as they rely heavily on imports of key raw materials such as wheat and raw sugar. A surge in oil prices and the exchange rate would directly lift import costs, squeezing profit margins and heightening overall financial strain.

Tensions escalated further after Iran’s Islamic Revolutionary Guard Corps warned of possible attacks on vessels attempting to transit the strait. According to Reuters, a senior IRGC official said via Iran’s semi-official ISNA news agency that the strait had been closed, adding that forces would target ships seeking passage.

Oil markets reacted sharply. On Sunday (local time), West Texas Intermediate crude for April delivery settled at $71.23 per barrel on the New York Mercantile Exchange, up 6.3 percent from the previous session. Prices briefly surged to $75.33, marking a 12 percent intraday jump — the highest level since June last year.

On the same day, Brent crude futures for May delivery on the Intercontinental Exchange in London climbed as high as $82.37 per barrel, up 13 percent intraday. They closed at $77.74, up 6.7 percent from the previous trading day.

With geopolitical risks spreading into domestic inflation and broader industry, policymakers face mounting pressure to maintain price stability. Officials say efforts to diversify crude oil imports and reduce dependence on the Middle East may help cushion short-term shocks, though prolonged instability would inevitably weigh on the economy.

A food industry official said, “While the government is maintaining its price stabilization stance, the burden has grown considerably amid rising concerns that instability in the Middle East could be prolonged. If raw material prices and exchange-rate volatility expand simultaneously, it will be difficult for companies to manage costs.”

Some analysts, however, say the short-term impact may remain limited as the government is taking parallel countermeasures. Efforts to diversify supply chains and reduce dependence on the Middle East are also gaining traction.

Another industry official said, “The government is moving preemptively, including by seeking alternative crude oil supplies from regions outside the Middle East, so the likelihood of an immediate severe shock is limited. However, if the situation drags on, the impact will be unavoidable.”