Morgan Stanley: 70% of South Korea’s oil imports come from the Middle East; oil prices rising 10% per liter may push inflation up by 0.6%

Golden Ten Data reported on March 4 that Morgan Stanley released a report on the Korean market, stating that the recent rise in international oil prices has triggered concerns about stagflation pressure. The combined effect of a weak exchange rate and high oil prices may cause inflation to transmit rapidly. However, against the backdrop of weak demand, the Bank of Korea is expected to remain cautious and not rush to raise interest rates. The report pointed out that Korea is highly dependent on energy imports, with more than 95% of its energy coming from imports, and 70% of its oil imports originating from the Middle East, directly affected by geopolitical conflicts. Analysis shows that for every 10% increase in oil prices, Korean inflation may rise by 60 basis points (0.6%). Due to weak demand, monetary policy is unlikely to be used to curb transmission this year, and government supply-side price control measures are more likely to become the preferred option.