Refer Report
Warning lights have grown in the international financial and raw materials markets due to the intensification of the Iran-Israel conflict, with prices of representative safe assets such as the dollar and U.S. Treasury bonds strengthening. Depending on how the situation unfolds, there are concerns that the impact could grow not only in the financial market but also in the real economy.
On the 2nd, the government held a series of meetings regarding the escalating situation in the Middle East and reviewed response measures. President Yoon Seok-yeol presided over the ‘Emergency Economic and Security Review Meeting Due to the Middle East Crisis’ at the Presidential Office in Yongsan this afternoon. President Yoon said at the meeting, “The situation is unusual,” and “We must analyze the impact of the unstable situation in the Middle East on our economy and logistics from various angles and take preemptive necessary measures.” This is the third time that President Yoon has presided over an economic and security review meeting related to the Middle East situation, following the attack on Israel by the Palestinian armed political faction Hamas in October last year and the attack on mainland Israel by Iran in April last year.
In the morning of this day, Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok and Bank of Korea Deputy Governor Yoo Sang-dae also held a meeting to check the situation and market impact. Deputy Prime Minister Choi said, “The volatility of the global stock market and international oil prices appears to have increased,” and added, “We will closely examine the impact on the financial market and the real economy with a high sense of vigilance, and if necessary, we will respond quickly in cooperation with relevant agencies.” Vice Governor Yoo said, “It is difficult to rule out the possibility that volatility in domestic and international financial markets will increase.”
In particular, the government and experts believe that the market impact will vary depending on Israel’s future actions. In a report published today, Park Sang-hyun, a researcher at iM Securities, pointed out that the current international oil price of $70 per barrel is a level that the international economy can handle and will not have a significant impact on our trade balance flow, adding, “The variable is the addition of Israel. “The intensity of military action,” he pointed out.
If the situation escalates into a bigger conflict, such as an all-out war, and the rise in international oil prices begins in earnest, not only the financial market but also the real economy, including exports, consumption, and investment, may be affected. As production and distribution costs, including financing costs, increase, prices may fluctuate, domestic demand may sink further, and export price competitiveness may be damaged.
The Bank of Korea immediately mentioned consumer price instability on this day. Kim Woong, Deputy Governor of the Bank of Korea, said at a price situation review meeting presided over on this day, “There is great uncertainty in oil prices due to the development of the Middle East situation,” and selected international oil prices and the Middle East situation that will affect them as the biggest variable in future consumer price trends. This means that although prices fell to the 1% range in September, there is a risk of a rebound depending on whether the situation in the Middle East escalates.
Reporters Choi Ha-yan, Jang Na-rae, and Noh Ji-won chy@hani.co.kr
Source: Korean