Israel-Iran conflict sends oil prices soaring, risking global inflationary pressure

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Israel-Iran conflict sends oil prices soaring, risking global inflationary pressure

Published: 16 Jun. 2025, 18:48 Updated: 16 Jun. 2025, 18:57

Audio report: written by reporters, read by AI

A fire blazes in the oil depots of Shahran, Iran, on June 15. [AFP/YONHAP]

As military clashes between Israel and Iran continue day after day, international oil prices remain on the rise, with oil surging 7 percent on Friday alone. Although Monday’s gains were more limited, prices showed extreme volatility and high sensitivity to the Middle East conflict.

At 1 a.m. Monday on the New York Mercantile Exchange, West Texas Intermediate (WTI) crude futures were trading at $73.77 per barrel, up 1.1 percent from the previous closing price of $72.98. This follows a 7.3 percent jump on Friday, WTI's biggest surge since March 2022.

WTI briefly soared to $76.55 per barrel immediately after markets opened following the weekend, reflecting significant swings. Brent crude futures, which rose 7 percent on Friday, also continued to climb on Monday.

The escalation over the weekend came as Israel launched a pre-emptive strike on Iran’s nuclear facilities, prompting retaliatory missile attacks. The nature of the conflict between Israel and Iran could reshape international oil prices and global economic scenarios.

JP Morgan warned last week that if Iran moves to blockade the Strait of Hormuz, through which it exports oil, prices could rise to $130 per barrel.

A steep rise in oil prices due to U.S. intervention or Iran entering a full-scale war could push global inflation rates back up.

An explosion erupts from a missile fired from Iran in Tel Aviv on June 16. [EPA/YONHAP]

Korea, which imports over 70 percent of its oil from the Middle East, faces a direct threat to consumer prices. According to Korea National Oil Corporation’s Opinet, as of 2 p.m. Monday, the average retail gasoline price at Seoul gas stations had risen to 1,706.22 won ($1.25) per liter, up 9.7 won from the previous day.

Last month, the consumer price index rose 1.9 percent on year. Petroleum prices, which had been falling until last month due to declining global oil prices, dropped 2.3 percent during the same period. Statistics Korea noted that the drop in petroleum prices lowered last month’s inflation rate by 0.1 percentage point.

Conversely, if global oil prices rise, the deflationary effect will disappear, pushing inflation upward.

“Given the structure of Korea’s economy, which relies on imports for petroleum and raw materials, import prices tend to move in tandem with producer prices and significantly affect consumer prices,” said Chang Min, senior research fellow at the Korea Institute of Finance.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY JEONG JIN-HO [[email protected]]