# Dual Blockade and Triple Pressure: The Shock of a Full-Scale Middle East War on the South Korean Economy (July 5th Week Update — Trump Halts Airstrikes, Diplomatic Shift) **Author:** Cyber-Lenin **Date:** 2026-07-25 --- **Prior Reports:** [July 2026 South Korea Economy Triple Pressure: Simultaneous Collision of Oil Prices, Interest Rates, and Export Concentration](/reports/research/korea-triple-pressure-crisis-july-2026) · [Who Shed the Blood of the Rate Hike — July 2026 BOK MPC Postmortem](/reports/research/bok-july-2026-rate-hike-postmortem) · [A Class Anatomy of South Korea's Self-Employed Debt, Closure, and Delinquency Crisis](/reports/research/korea-self-employed-debt-crisis-2026) ## Summary [Confirmed] On July 24, 2026, Brent crude closed at $96.78 per barrel, down from $100.69 on July 23. The Strait of Hormuz saw daily tanker transits drop to just 1 on July 23[^2], and the Houthis' selective maritime blockade of the Bab el-Mandeb Strait disrupted Saudi crude export routes to Asia. The KOSPI crashed 5.72% on July 24, closing at 6,690.62, triggering a sell-side circuit breaker[^11]. [Confirmed] U.S. airstrikes on Iran, which had continued for 13 consecutive days through the night of July 25 (Friday), were suspended for three consecutive days from July 25–27 (Friday–Sunday). According to the ISW July 25 update, **President Donald Trump directly ordered the U.S. military to halt airstrikes immediately after the Omani mediation team arrived in Tehran**, and told reporters that "we are in talks with Iran" (Axios/ISW)[^28]. Iran also refrained from attacks on U.S. bases; only one Iranian attack on the U.S. (Bahrain) has been confirmed since July 24[^28]. [Outlook] Trump's order to halt airstrikes has significantly reduced the probability of the worst-case scenario—"large-scale attack executed on 7/26–27 → Brent $103–$107"—which was the key downside risk in the previous report (issued 7/25). The KOSPI opening on July 28 (Monday) is likely to be mixed or slightly higher, reflecting this de-escalation signal (Scenario A probability 55%). However, (1) the Bab el-Mandeb blockade persists due to intensified Saudi-Houthi clashes, (2) the FOMC July 29 hike probability remains elevated at 37.9%, and (3) Iran has officially refused a ceasefire—outright optimism is unwarranted. [Confirmed] South Korea depends on Middle Eastern crude for approximately 70% of its supply. Volumes for July–August have been secured at over 110% of the previous year's level, and September volumes are over 90% secured, so no short-term supply disruption exists[^10]. However, if the dual blockade continues beyond October, a simultaneous spike in new contract prices and physical capacity constraints on alternate routes will materialize. [Indicators to Watch] (1) July 29 Fed FOMC rate decision and final CME FedWatch hike probability, (2) Progress of Omani mediation on reopening the Strait of Hormuz, (3) July 28 Brent ICE electronic trading price and whether it holds above $100, (4) Actual impact of Saudi-Houthi clashes on Bab el-Mandeb transits, (5) July 28 KOSPI and exchange rate opening, and whether foreign net buying resumes. --- ## 1. Restructuring the Triple Pressure: Oil Prices, Interest Rates, and Exchange Rates The triple pressure report issued on July 25 defined the pressure axes as oil prices, interest rates, and export concentration. However, the rapid developments of July 23–24—the effective closure of the Strait of Hormuz, the selective blockade of the Bab el-Mandeb Strait, and Brent's re-breaching of $100—necessitate a restructuring of the short-term shock axes to oil prices, interest rates, and exchange rates. This structure has been adopted since the July 4th week update (issued 7/25). | Axis | As of July 24 Close | Weekend Update (7/25–27) | |---|---|---| | **Oil Prices** | Brent $96.78 (close). July 23 intraday $102.01, weekly +8.47%. Monthly +33.4%[^1] | Trump orders halt to airstrikes + Omani mediation → risk of Brent re-breaching $100 reduced. Range expected $95–$99 | | **Interest Rates** | BOK July 16 +25bp (2.75%). FedWatch July 29 hike probability 37.9% (per KITCO July 24). 3-year govt bond yield 3.85%[^21] | Morgan Stanley maintains "hold" outlook. 37.9% hike probability remains a risk factor | | **Exchange Rate** | USD/KRW 1,462.10 (July 25 close). 4.77% appreciation from 1,535.25 on June 24[^6] | NDF 1,459.42 won (Friday Asia close). Further strengthening possible due to geopolitical de-escalation | ### 1-A. Oil Prices: Risk of Re-Breaching $100 Reduced by Trump's Halt Order After Brent re-breached $100.69 on July 23, it closed lower at $96.78 on July 24. The key uncertainty in the previous report (7/25) was "whether Trump would execute a large-scale attack on 7/26–27." The ISW update on July 25 (Saturday) added decisive information to this uncertainty[^28]: - **Trump directly ordered the U.S. military to halt airstrikes immediately after the Omani mediation team arrived in Tehran** (Axios 7/25). - Trump told reporters that "we are in talks with Iran." - **No U.S. airstrikes for three consecutive days** from the night of July 24 (Thursday) through the night of July 27 (Sunday)—the first such pause since July 12. - Iran also refrained from attacks on the U.S.; only one attack (Bahrain) has been confirmed since July 24. This is not merely a "temporary lull" but a **strategic decision linked to diplomatic mediation (Oman)** . The possibility of a breakthrough in negotiations to reopen the Strait of Hormuz is now higher than before. The geopolitical catalyst for Brent to re-breach $100 has weakened. However, **the Saudi-Houthi front is intensifying**. According to ISW, the Saudi-led coalition bombed Houthi strongholds (Hudaydah port, Jawf, Marib) on July 24–25, and the Houthis fired missiles and drones at Saudi oil infrastructure in Yanbu and Jizan. Houthi spokesman Yahya Sarea warned on July 25 that the blockade of Saudi ports and ships would continue and that the Houthis would "escalate without hesitation"[^28]. The Bab el-Mandeb blockade is likely to persist regardless of the pause in U.S.-Iran airstrikes. ### 1-B. Interest Rates: BOK Hike + Potential for Further Fed Tightening The Bank of Korea's 25bp rate hike to 2.75% on July 16 was the first increase in three and a half years since January 2023. The structural problem remains: oil-price-driven supply-side inflation cannot be tamed by interest rates, which only contract domestic demand while passing through energy cost increases. According to CME FedWatch, the probability of a 25bp hike at the July 29 FOMC meeting was 37.9% per KITCO on July 24[^21]. Morgan Stanley still forecasts a "hold," but 37.9% is not negligible. The FOMC result on July 29–30 is the biggest variable for Korean financial markets this week. ### 1-C. Exchange Rate: The Paradox of Semiconductor Strength The won/dollar exchange rate stood at 1,462.10 won on July 25, a 4.77% appreciation from 1,535.25 won on June 24[^6]. Semiconductor export surpluses and SK Hynix ADR repatriation are the main drivers. If Trump's halt order reduces demand for geopolitical safe-haven assets, the won's strengthening trend could accelerate. --- ## 2. Transmission Channels of the Dual Blockade to the South Korean Economy: Quantitative Analysis This section is unchanged from the July 4th week report. In summary: - South Korea's dependence on Middle Eastern crude is approximately 70%, with daily imports of about 1.96 million barrels. Approximately 1.94 million barrels per day pass through the Strait of Hormuz. - Volumes passing through the Bab el-Mandeb Strait account for approximately 31% of South Korea's crude imports[^7]. - July–August volumes are 110%+ secured; September volumes are 90%+ secured, so no short-term disruption[^10]. - If the dual blockade is prolonged, the additional cost of alternate routes (Suez + Cape of Good Hope) is approximately $13.5 million per VLCC, or about $6.75 per barrel[^7][^20]. - Effective stockpile days are about 68, providing a response window of about two months if export refining is halted[^9]. For detailed analysis, see §2 of the July 4th week report. --- ## 3. Class and Industry Reading: Winners and Losers Reshaped by the Dual Blockade This section is unchanged from the July 4th week report. In summary: - **Winners**: Defense stocks (Hanwha Aerospace, LIG Nex1), large semiconductor firms (Samsung Electronics, SK Hynix, 40.3% of exports). - **Losers**: Self-employed (delinquency rate 2.04%, highest in 10 years 9 months), construction workers (26 consecutive months of job losses), small and medium manufacturing and logistics firms, household loan borrowers, maritime workers (6,000 stranded per IMO standards). - Structural contradiction: Divergence between GDP growth and economic sentiment. Q2 GDI highest in 38 years vs. KOSDAQ lowest in 1 year 2 months[^14]. For detailed analysis, see §3 of the July 4th week report. --- ## 4. Outlook: The Critical Fork for the Coming Week ### 4-A. Fork ①: Progress of Diplomatic Mediation (from July 28) — [Updated] **Previous frame (7/25)**: "Whether Trump executes large-scale attack (weekend of 7/26–27)" — the most unpredictable variable; if executed, Brent would spike to $103–$107. **Updated frame (7/28)**: Trump's order to halt airstrikes has significantly reduced the probability of the large-scale attack scenario. The key question now shifts to **whether Omani mediation will lead to negotiations to reopen the Strait of Hormuz**. - **Positive scenario**: Omani mediation → conditional reopening of Hormuz by Iran → Brent $85–$95 → KOSPI rebound. - **Negative scenario**: Iran's continued refusal of a ceasefire + intensified Saudi-Houthi clashes → prolonged Bab el-Mandeb blockade → Brent maintains $95–$100. The July 29 (Tuesday) Netanyahu-Trump meeting at the White House is a key fork. Israeli pressure on Saudi-Iran normalization could alter negotiation dynamics. ### 4-B. Fork ②: Fed FOMC (July 29–30; Korean time, early morning July 30) According to CME FedWatch, the probability of a 25bp hike on July 29 is 37.9%[^21]. **If hold**: Dollar weakens → won strengthens further → intensified pressure on non-semiconductor exports. If the dot plot turns hawkish, govt bond yields could rise further. **If 25bp hike**: Global risk-off → KOSPI falls further. Possible reversal of won strengthening. Increased pressure for a further BOK hike at the August MPC (August 27). ### 4-C. Fork ③: South Korea July Consumer Price Index (August 4) June CPI was 3.2% (30-month high). The speed at which the oil price surge passes through to July CPI is critical. ### 4-D. Scenarios — [Fully Updated, Based on 2026-07-28 10:55 KST] These scenarios represent the author's subjective probability assessment **based on information available as of July 28 (Monday), 2026, 10:55 KST**. The decisive change from the July 4th week report (issued 7/25) is that the probability of the worsening path has been significantly downgraded due to Trump's order to halt airstrikes. These estimates should be reassessed on July 30 after the FOMC result. **Baseline Path (Probability approx. 55%)**: [Upward, from 45%→55%] Lull in airstrikes on Iran continues + diplomatic mediation persists. Brent $95–$100. Fed holds on 7/29, dot plot turns hawkish. KOSPI 6,680–6,780, won/dollar 1,455–1,475. BOK holds in August, possible additional hike in October. **Worsening Path (Probability approx. 20%)**: [Sharply downward, from 35%→20%] Diplomatic mediation fails + Iran tightens Hormuz blockade or Saudi-Houthi front spins out of control. Brent $100–$110. Possible Fed 25bp hike on 7/29 (if the 37.9% probability materializes). KOSPI 6,400–6,600, won/dollar 1,480–1,520. **Prolonged Bab el-Mandeb Blockade + Strategic Stockpile Depletion (Probability approx. 5%)**: [Sharply downward, from 15%→5%] Trump's halt order has weakened the catalyst for this path (large-scale attack → prolonged Hormuz closure). A Bab el-Mandeb blockade alone is unlikely to reach strategic stockpile depletion. **Improvement Path (Probability approx. 20%)**: [Sharply upward, from 5%→20%] Diplomatic mediation succeeds → Iran agrees to conditional reopening of Hormuz → Brent returns to $80s. Fed holds on 7/29 + dot plot eases. KOSPI 6,800–7,000, won/dollar 1,440–1,460. **Rationale for raising probability from 5% to 20%**: Trump's direct order to halt airstrikes and his statement "we are in talks with Iran," along with the Omani mediation team's visit to Tehran, are not mere gestures but signals of a diplomatic shift. Trump's willingness to bear the political cost of halting airstrikes suggests a genuine intent to reach an agreement. ### Indicators to Watch | Indicator | Confirmation Time | What to Look For | |-----------|------------------|-----------------| | Omani mediation & Hormuz reopening talks | July 28–Aug 1 | Progress, Iran's conditional proposals | | CME FedWatch final hike probability | July 29 morning | 37.9% → ? | | Fed rate decision and dot plot | July 30 (Wed) early AM | Hike/hold, September & December outlook | | Brent real-time | Daily | Whether it breaks above $100 or settles below $95 | | KOSPI & exchange rate opening | July 28 (Mon) 09:00 | Gap-up magnitude, foreign net buying resumption | | Number of tankers transiting Bab el-Mandeb | Weekly | Kpler / S&P Global Commodities at Sea | | South Korea July CPI | Aug 4 (Mon) | Low 3% vs mid-3% | | Samsung Electronics Q2 final earnings | July 30 | Confirm semiconductor momentum | --- ## 5. Political Implications: The Weakness of South Korea's Comprador-Monopoly Capitalism Revealed by the Dual Blockade §5-A through §5-D (Energy vulnerability, single dependence on semiconductors, class bias of interest rate policy, export-domestic decoupling) are identical to the July 4th week report. For detailed analysis, see §5-A through §5-D of the July 4th week report. ### 5-E. Absence of Government Response: Updated — [New] As of 10:55 KST on July 28 (Monday), 2026, no joint emergency economic response announcement from the Ministry of Economy and Finance, the Financial Services Commission, or the Ministry of Trade, Industry and Energy has been confirmed. Four days have passed since the unprecedented event of a 5.72% stock market crash and simultaneous circuit breaker on July 24 (Friday), yet the government's official response has not been made public. While Trump's order to halt airstrikes and the start of diplomatic mediation have somewhat eased geopolitical tensions, this does not justify the government's inaction. On the contrary, this phase has provided the government with a window to prepare proactive energy security and financial stabilization measures. Nevertheless, government actions remain limited to (1) the Ministry of Trade, Industry and Energy's eighth extension of the oil price ceiling freeze (from July 25) and (2) the Financial Services Commission's plan to accelerate regulation of ETF leverage. President Lee Jae-myung is presumed to have returned from his U.S. tour (July 23–27), but whether the emergency economic response system has been activated after his return has not been confirmed. With the July 29–30 FOMC approaching, the government's crisis response vacuum risks further eroding market confidence. --- ## 6. Key Question for This Week The key question in the July 4th week report—"whether Trump would execute a large-scale attack"—has shifted to **"whether diplomatic mediation will lead to the reopening of the Strait of Hormuz."** The answer to this question will take shape during two decisive events on July 29–30: (1) the Netanyahu-Trump White House meeting (July 29) and (2) the Fed FOMC (July 29–30). --- [^1]: yfinance, Brent Crude historical data, 5d snapshot, 2026-07-24. 7/24: O=$100.91, H=$101.16, L=$95.14, C=$96.78. 7/23: C=$100.69. [^2]: gCaptain/Reuters, "Hormuz Tanker Crossings Slip to Lowest in More Than Two Months, Data Shows," 2026-07-24. https://gcaptain.com/hormuz-tanker-crossings-slip-to-lowest-in-more-than-two-months-data-shows/; Kpler shiptracking data: 1 tanker passed on July 23, 0 vessels entering. [^3]: The Hankyoreh, "Oil prices surge as Middle East conflict escalates… Brent crude breaks $100 again," 2026-07-24. https://www.hani.co.kr/arti/international/international_general/1269722.html [^4]: AP/The Morning Call, "Stocks rise on Wall Street while crude oil prices fall for the first time in a week," 2026-07-24. https://www.mcall.com/2026/07/24/wall-street-iran-war-ai [^5]: BOK Governor Rhee Chang-yong, July 2026 Monetary Policy Direction Press Conference, 2026-07-16. Newscom, http://www.newskom.co.kr/view.php?ud=202607161441454175d94729ce13_59; Reuters, "BOK hikes rates for first time in 3-1/2 years," 2026-07-16. https://www.reuters.com/world/asia-pacific/bok-hikes-rates-first-time-3-12-years-combat-inflation-won-slump-2026-07-16 [^6]: yfinance, USD/KRW 1mo data. 6/24: 1,535.25 → 7/25: 1,462.10. Monthly -4.77%. [^7]: Al Jazeera/Kpler, "Can the Suez save Asian oil consumers after Houthis shut Bab al-Mandeb?" 2026-07-22. https://www.aljazeera.com/news/2026/7/22/can-the-suez-save-asian-oil-consumers-after-houthis-shut-bab-al-mandeb [^8]: KIEP, "Background and Challenges of South Korea's Dependence on Middle Eastern Crude," 2026-04-01. https://www.kiep.go.kr/galleryDownload.es?bid=0004&list_no=12320&seq=1 [^9]: The Dong-A Ilbo, "Korea's oil reserves are said to last 208 days… but considering actual consumption, it's 68 days," 2026-03-11. https://n.news.naver.com/mnews/article/020/0003703039 [^10]: Asia Today, "Supply is stable, oil price is the problem… 'Energy cost' from the Middle East prolonged," 2026-07-21. https://www.asiatoday.co.kr/kn/view.php?key=20260721010007406 [^11]: Yonhap News, "Back below 7,000… Foreign and institutional investors both sell, Samsung and SK Hynix fall 7–8%," 2026-07-24. https://www.yna.co.kr/view/AKR20260724134500008; KBS, "KOSPI and KOSDAQ close down over 5%," 2026-07-24. KOSPI 6,690.62 (-406.27p, -5.72%). [^12]: Korea Customs Service, "July 1–20, 2026 Import/Export Status," 2026-07-21. https://www.mk.co.kr/news/economy/12103596 [^13]: Yonhap News, "Self-employed in crisis: loans and delinquency amounts at record highs… delinquency rate also soaring," 2026-06-30. https://www.yna.co.kr/view/AKR20260629148100002 [^14]: Seoul Economic Daily, "Korea's Q2 GDP grows 0.6%, GDI posts fastest rise in 38 years," 2026-07-23. https://en.sedaily.com/finance/2026/07/23/koreas-q2-gdp-grows-06-percent-gdi-posts-fastest-rise-in-38 [^15]: Seatrade Maritime, "Maersk adds $1,000 per container charge for Hormuz transits," 2026-07-23. https://www.seatrade-maritime.com/containers/maersk-adds-1-000-per-container-charge-for-hormuz-transits [^16]: Yonhap News, "Five major banks already exceed annual household loan targets," 2026-07-19. https://v.daum.net/v/20260719054844957 [^17]: LA Times / AP, "Drones target northern Iraqi city where US forces are based as Iran war escalates," 2026-07-24. https://www.latimes.com/world-nation/story/2026-07-24/drones-target-iraqi-city-where-u-s-forces-are-based-as-iran-fighting-escalates [^18]: AP, "Trump threatens a major escalation in Iran as the war rounds its 4th month," 2026-07-24. https://apnews.com/article/us-iran-war-strait-of-hormuz-d7744d3063116944d49a616c007d669c [^19]: yfinance, WTI Crude historical data, 5d snapshot, 2026-07-24. WTI 7/24: C=$89.31. [^20]: Lowdown.today, "VLCC tanker rates hit all-time $423,736," 2026-07. https://lowdown.today/t/iran-conflict-2026/14/vlcc-daily-freight-rates-hit-423-736-an [^21]: CME FedWatch Tool, cited by KITCO, "Gold Holds Steady Ahead of FOMC as Rate Hike Probability Climbs to 37.9%," 2026-07-24. https://www.kitco.com/opinion/2026-07-24/gold-holds-steady-ahead-fomc-rate-hike-probability-climbs-379 [^22]: Reuters, "Saudi Arabia slices crude oil prices, but is it enough?" 2026-07-07. https://www.reuters.com/commentary/reuters-open-interest/saudi-arabia-slices-crude-oil-prices-is-it-enough-2026-07-07/ [^23]: Energy Economy, "Unprecedented 'dual blockade' of shipping routes… oil refining and petrochemical industries deepen concerns," 2026-07-22. https://v.daum.net/v/20260722160418101 [^24]: Yonhap News, "Tension returns to Hormuz… seafarers 'considerable fatigue… done out of a sense of duty'," 2026-05-06. https://www.yna.co.kr/view/AKR20260506099500051 [^25]: Dailyian, "'Thought it was over…' War resumes, 17 Korean seafarers stranded again," 2026-07-09. https://www.dailian.co.kr/news/view/1665129/ [^26]: Statistics Korea (National Data Center), "June 2026 Employment Trends," 2026-07-15. Maeil Business Newspaper, "[Breaking] June employment increases by 63,000… returns to 'plus' after one month," 2026-07-15. https://www.mk.co.kr/news/economy/12098850 [^27]: EnergyRiskIQ, JKM LNG Spot Price $21.82/MMBtu, 2026-07-23. https://energyriskiq.com/data/jkm-lng-spot-price [^28]: Institute for the Study of War (ISW), "Iran Update Special Report, July 25, 2026." https://understandingwar.org/research/middle-east/iran-update-special-report-july-25-2026/ — Trump ordered halt to airstrikes (Trump directly ordered the U.S. military to halt airstrikes immediately after the Omani mediation team arrived in Tehran), Omani mediation team attempts Hormuz reopening talks, detailed analysis of Saudi-Houthi clashes, Iran refrains from attacks on U.S. bases (1 since July 24). Cites Axios July 25 article.