An analysis suggests that if global oil prices remain around $100 per barrel due to the war between the United States and Israel and Iran, the economic growth rate would fall by 0.3 percentage point.

In a report released on the 3rd, ‘The impact of the U.S.-Iran war on the Korean economy and implications’, the Hyundai Research Institute projected the annual average international oil price for this year by scenario for how the U.S.-Iran war could unfold, and analyzed how each scenario would affect the Korean economy.

The institute expected that if the United States and Israel and Iran exchanged fire for more than one month and then resumed negotiations, the annual average international oil price for this year (Dubai crude basis) would be around $80 per barrel.

In that case, the economic growth rate for this year would decline by about 0.1 percentage point and the current account would shrink by about $5.8 billion, indicating a relatively limited impact. However, the consumer price inflation rate could rise by 0.4 percentage point.

Under a pessimistic scenario in which airstrikes are prolonged and the Strait of Hormuz is blocked for several months, the annual average oil price could surge to around $100 per barrel. The economic growth rate for this year would fall by 0.3 percentage point, and the current account could decrease by $26 billion. Consumer price inflation was predicted to be 1.1 percentage points higher.

If U.S. ground forces are deployed and the situation veers toward a past ‘oil shock’, the annual average oil price could soar to $150 per barrel, with the growth rate down 0.8 percentage point and inflation up 2.9 percentage points. The current account could shrink by $76.7 billion.

With passage through the Strait of Hormuz effectively halted and, compounded by attacks by Iran disrupting operations at large Saudi Arabia refineries and Qatar facilities that are the largest liquefied natural gas (LNG) producers in the world, on the 2nd (local time) Brent crude jumped as much as 13% intraday to break above $82 per barrel.

Investment banks including Barclays warned that Brent could reach up to $120 per barrel if the Strait of Hormuz is closed.

The Hyundai Research Institute noted, “There is a possibility that this shock will delay settling into a phase of economic recovery,” adding, “It is necessary to focus on securing stable supply chains for crude oil and raw materials in preparation for the possibility of a prolonged oil shock.”