The Strait of Hormuz is the outlet for Middle Eastern oil-producing countries and the inlet for raw materials for Korean manufacturing. Navigation disruptions can lead to industrial security risks that shake the supply chains for refining, petrochemicals, and basic materials simultaneously. [Photo courtesy of Yonhap News]Table of Contents

① Why Iran's Nuclear Issue Targets Korean Factories

② If Hormuz Closes, Korea's Economic Arteries Will Also Be Blocked

③ Why Refining and Petrochemicals Are Security Industries

④ Oil to the US and Non-Middle Eastern Regions, Flexible Processing

⑤ The Hydrogen Economy Exists Within Petrochemicals, Not Outside of Them

What's Scarier Than Oil Prices is Supply Chain Disruption

Crude Oil, Naphtha, NCC, and Basic Materials Are Shaken Simultaneously

Korea is Not an Observer of the Middle East Conflict, but a Direct Victim

The Strait of Hormuz is not just a narrow waterway on the map. It is the artery of the Korean economy.

If this route is disrupted, it's not just oil prices that will rise. Crude oil will be affected, naphtha will be affected, naphtha cracking centers (NCC) will be affected, and the entire chain of basic materials for Korean manufacturing will be shaken.

The moment the Iran nuclear crisis escalates into a Middle East conflict and disruptions occur in navigation through Hormuz, Korea will no longer be a spectator to a distant war but a direct victim.

Hormuz is the Exit for Oil Producers and the Entrance for Korean Industry

According to the International Energy Agency (IEA), approximately 15 million barrels of crude oil per day, about 34% of global crude oil trade, passed through the Strait of Hormuz in 2025. The majority of this flow was directed towards Asia, and the IEA pointed out that Japan and South Korea are particularly reliant on the oil flow through Hormuz.

Hormuz is the exit for Middle Eastern oil producers and the entrance for Asian manufacturers. If this passage is blocked, it's not just the oil-producing countries that will face problems; the industrial systems of countries that import energy to produce goods will be shaken simultaneously.

Korea's vulnerability is evident in the numbers. According to a Reuters report, Korea relied on the Hormuz route for about 61% of its crude oil and about 54% of its naphtha last year.

Crude oil is the starting point for refining, and naphtha is the key raw material for petrochemicals. Ultimately, Korea has placed both its energy and material arteries on Hormuz simultaneously.

This is why the Iran nuclear crisis and Hormuz instability are issues for the Korean economy.

What's Scarier Than Oil Prices is Naphtha Supply Chain Disruption

Viewing the Hormuz risk solely as a rise in oil prices leads to an underestimation of the problem. When oil prices rise, the prices of gasoline, diesel, and jet fuel increase. This is something everyone knows.

However, a deeper shock to the Korean economy comes afterward.

When crude oil prices rise and supply is disrupted, the input costs and refining margins for oil companies are affected. The supply of naphtha from the refining process becomes unstable, and the price of imported naphtha also surges.

When naphtha is affected, the operating rate of NCC fluctuates, and when NCC fluctuates, the supply of basic olefins such as ethylene, propylene, butadiene, benzene, toluene, and xylene is disrupted.

When Basic Olefins Are Shaken, the Entire Manufacturing Sector Is Shaken

Basic olefins are the foundational materials of industry. Ethylene is used for plastics and packaging materials, propylene for automotive, home appliance, and textile materials, butadiene for synthetic rubber, and benzene, toluene, and xylene are linked to various chemical materials.

This chain extends to electronics, automobiles, shipbuilding, construction, medical, and food packaging. When Hormuz is disrupted, it's not just the prices at gas stations that rise. The cost of factory raw materials, logistics, packaging, component materials, and consumer goods will all fluctuate simultaneously.

This is why the government has implemented measures for "prohibition of hoarding and emergency supply adjustment" for petrochemical raw materials.

Amidst the Iran crisis, the government has implemented measures to restrict excessive inventory accumulation of key naphtha-based basic olefins such as ethylene, propylene, butadiene, benzene, toluene, and xylene.

This is not merely a price stabilization measure. It is a signal that the government views basic petrochemical raw materials as de facto supply chain management items.

The Government's Hoarding Ban is a Supply Chain Warning Bell

Korea has already begun to pursue alternative procurement methods to reduce its reliance on Hormuz. According to government announcements, 273 million barrels of crude oil and 2.1 million tons of naphtha have been secured through routes bypassing Hormuz.

Saudi Arabia has pledged shipments through its Red Sea ports, and Kazakhstan and Oman have also been included in the supply of crude oil and naphtha. These quantities are explained to be equivalent to more than three months of crude oil and about one month of naphtha on a peacetime basis.

However, these figures indicate vulnerability rather than reassurance. It means that the existing supply chain was so tied to Hormuz that alternative supplies had to be urgently secured.

The reasons why Korea can be classified as a major direct victim, not an observer of a Middle East conflict, do not end here.

The shock from crude oil and naphtha quickly escalates into a currency shock. As energy import costs increase, the demand for dollars grows.

When the won weakens, import prices rise again. Rising oil prices push up inflation, and as inflation rises, the Bank of Korea is forced to delay interest rate cuts or maintain a contractionary stance, even while aware of the economic slowdown.

This, in turn, increases companies' financing costs, dampens consumption, and shakes the profitability of export companies.

Hormuz Shock Spreads to Currency, Interest Rates, and Logistics

Exports also face a dual shock. A weaker won may appear outwardly advantageous for export companies. However, the effect is limited when import costs for energy and raw materials simultaneously increase.

Furthermore, if a Middle East conflict shakes the global economy, demand for semiconductors, automobiles, shipbuilding, petrochemicals, and steel may also slow down.

Korea is a country that imports energy and exports manufactured goods. When raw materials become more expensive, logistics are blocked, and global demand cools simultaneously, the effect of currency alone cannot sustain the economy.

The Hormuz crisis also brings shipping and insurance issues. As war risk increases, the cost of vessel insurance rises.

Longer shipping routes increase transit times and costs. Slowdowns in maritime logistics disrupt the arrival schedules of raw materials and increase inventory management costs.

Manufacturing is an industry that relies on timely raw material imports to operate factories. If shipping routes are unstable, the factory's timetable is disrupted. This is precisely what it means for the arteries of the Korean economy to be blocked.

Even if Hormuz is not completely closed, the impact is significant enough.

Navigation disruptions, increased insurance premiums, alternative transportation, vessel waiting times, and delayed raw material arrivals alone can cause Korean manufacturing to lose both cost competitiveness and its operational timetable.

 Supply chain crises do not always occur only after complete blockades. Uncertainty prolongs, companies engage in a scramble for raw materials, and logistics and financial costs rise simultaneously – at that moment, the crisis has already begun.

Shift from Cheap Procurement to Survival Procurement

The approach to solving this problem also needs to change. Simply releasing strategic oil reserves and providing fuel subsidies will not be enough.

Korea must recalculate its essential supply of crude oil, naphtha, and basic olefins, taking into account Hormuz risks.

It is necessary to determine the minimum operating volume for each refinery, petrochemical complex, and industry. Plans must also be established in advance for how to divide export volumes and domestic essential supplies during a crisis.

Reliance solely on peacetime profitability can lead to the entire industry coming to a halt when a crisis occurs.

Supply lines must also be reconfigured.

It is impossible to cut off crude oil from the Middle East overnight. However, strategic supplies must be secured through routes with low Hormuz dependence, such as the US, Kazakhstan, Brazil, Canada, Oman, and Saudi Arabia's Red Sea ports.

The problem is that simply changing import sources is not enough.

Different crude oil properties alter refining yields, affecting naphtha production volume and quality. Ultimately, diversifying crude oil supply sources must go hand-in-hand with redesigning refining and petrochemical processes.

Korean industrial policy thinking must also shift from an export-centric to a self-sufficiency-centric approach.

Self-sufficiency here does not mean a closed economy. It means keeping a minimum industrial supply under domestic control to prevent the nation from stopping during a crisis.

Refining is the front line of energy security, and petrochemicals are the rear guard of manufacturing security. Crude oil import, refining, naphtha production, NCC operation, and basic material supply are an integrated process. In an era where Hormuz is unstable, this integrated process must be viewed as a security industry.

It is also important to be cautious about presenting renewable energy as a solution to this problem.

Renewable energy can be a supplementary measure for the power sector. However, it is not a direct solution for crude oil, naphtha, NCC, and basic material issues.

Petrochemicals are an industry that deals with carbon-based raw materials, not electricity. Solar and wind power cannot produce ethylene and propylene.

However, the transportation sector is different.

To reduce demand for gasoline and diesel, the transition to electric vehicles and hydrogen fuel cell vehicles needs to be accelerated. A strategy is needed to transition to battery electric vehicles for passenger cars and short-distance transport, and to hydrogen fuel cells for long-distance freight, buses, and port, airport, and military logistics.

Hydrogen power generation should also be considered as a pillar of power security. However, the order of priority is important here as well.

Hydrogen produced by water electrolysis still faces a high economic barrier. In the short term, a realistic hydrogen economy is needed that consolidates by-product hydrogen and reformed hydrogen from refining and petrochemical processes as industrial security resources.

The Question Posed by Hormuz

The Hormuz crisis ultimately poses one question to Korea.

How much longer will Korea entrust its industrial arteries to a single narrow strait in the Middle East? In an era of importing cheap crude oil and naphtha to produce and sell a lot, that structure was a source of competitiveness.

However, with the escalating Iran nuclear crisis and the possibility of a Middle East conflict, the same structure has become a vulnerability. Korea must now consider procurement for survival, not just cheap procurement.

If Hormuz closes, Korea's economic arteries will also be blocked. This statement is not an exaggeration. Korea is a country that simultaneously receives energy and material supplies through crude oil and naphtha.

When Hormuz is unstable, refining and petrochemicals are shaken, and when refining and petrochemicals are shaken, manufacturing, prices, currency, and exports are all shaken together.

Therefore, Iran's nuclear issue is not a military problem in the Middle East but the starting point of Korea's industrial security. Korea must now view Hormuz not as international news but on the map of industrial survival.

Preview of Next Article

③ Why Refining and Petrochemicals Are Security Industries

The next article will discuss why refining and petrochemicals should be redefined as security industries rather than export industries.

It will analyze how the integrated process from crude oil–refining–naphtha–NCC–basic olefins–materials industry supports the foundational structure of Korean manufacturing, and why petrochemical restructuring is not merely about closing deficit facilities but about reorganizing the national supply chain.