A consumer picks up a napa cabbage at a supermarket in Seoul, Wednesday. Yonhap
Cooling inflation in Korea possibly can face setbacks from the heightening Israel-Hezbollah conflict as it could drive a spike in global oil prices, according to analysts, Wednesday.
The projection was made as the country's consumer prices last month grew at the slowest pace in nearly four years, driven by a decline in prices of petroleum products.
Citing data released Wednesday, Statistics Korea said consumer prices gained 1.6 percent in September from a year earlier, easing to the lowest level since February 2021 when it picked up 1.4 percent.
The stats agency attributed the softened inflation mainly to a 7.6 percent year-on-year fall in prices of petroleum products over stabilizing global oil prices.
It was the first time that prices of petroleum products had dropped since February.
“Under the circumstances, the Israel-Hezbollah war remains a risk on Korea's path to fully bring down inflation to the midterm target of 2 percent,” Hanyang University economics professor Ha Joon-kyung said.
The professor pointed out that global oil prices rose about 3 percent, Tuesday, after Iran fired a salvo of ballistic missiles at Israel in retaliation for Israel's campaign against Tehran's Hezbollah allies in Lebanon.
In particular, Brent futures rose 2.6 percent to settle at $73.56 a barrel, while U.S. West Texas Intermediate (WTI) crude climbed 2.4 percent to settle at $69.83.
Both crude benchmarks were up by over 5 percent earlier Tuesday.
The international oil market was trading down near a two-week low prior to the news that Iran was planning a missile attack.
This trading trend came as outlook for increased supplies and tepid global demand growth outweighed concerns over the Middle East conflict.
Mirae Asset Securities analyst Suh Sang-young turned down the possibility of a full-scale war, but noted that “the military conflict can unnerve the oil market and result in volatile trading.”
He said a possible Israeli attack on Iranian oil production or export facilities could worsen the market, disrupting production of potentially more than 1 million barrels per day.
During a meeting of economy-related ministers, Wednesday, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok vowed to enhance market monitoring and devise responses in the wake of Iran's Tuesday attack.
“The government will stay vigilant against heightened tensions in the Middle East,” he said, adding the missile attack “has raised the volatility in the global financial market and global oil prices.”
“The government will thoroughly check its potential impact on our financial market and the real economy with extra alertness, and will react swiftly, if needed, in cooperation with relevant agencies,” Choi added.