Suspected Iran Attack on Korean Cargo Ship Raises Hormuz Risks, Oil Price Concerns

Suspicions that Iran attacked the Korean cargo ship NAMU have sharply raised tensions around the Strait of Hormuz, fueling concerns that South Korea’s crude oil supply strategy could be disrupted if Korean-operated vessels become targets. The renewed Middle East risk is also pushing international oil prices higher, adding another policy variable for Seoul.

According to relevant authorities on May 5, a fire broke out in the engine room of the NAMU after an explosion at about 8:40 p.m. the previous day while the ship was anchored in waters north of Sharjah in the United Arab Emirates, inside the Strait of Hormuz. The vessel is Panama-flagged and operated by South Korean shipping company HMM. It had 24 crew members aboard: six South Koreans and 18 foreign nationals.

Regional tensions have intensified. Iran has attacked oil export ports and other sites with missiles and drones, and the UAE has warned of retaliation. A ceasefire between the United States and Iran also appeared to be on shaky ground. Iran, strongly opposing the U.S. “Project Freedom,” launched missiles and drones, and U.S. naval vessels have continued intercepting them.

As a result, expectations that South Korean tankers could leave the Strait of Hormuz in the near term have largely faded. Seven tankers linked to South Korean refiners — carrying about 14 million barrels — remain stuck in the strait, and rising tensions have further reduced the likelihood they can depart soon.

A bigger concern is the possibility of a targeted attack on a Korean shipping operator. If it is confirmed that Iran deliberately targeted a South Korean vessel, disruptions would be difficult to avoid even for crude supplies rerouted via the Red Sea, where the Iran-aligned Houthi rebels remain active, the report said.

The situation could also complicate the Industry Ministry’s crude supply planning. Alternative crude secured for this month totals 74.62 million barrels, or 87% of normal import volumes. But if tensions rise simultaneously in the Strait of Hormuz and the Red Sea, bottlenecks could worsen at alternative ports such as Yanbu in Saudi Arabia, making even those volumes harder to bring in. With many tankers already waiting, delays would be hard to avoid, the report said.

Higher shipping rates and insurance premiums are another concern. If costs rise as tensions mount, they would likely be passed on to crude prices with a lag.

Oil markets reacted immediately. Despite an output increase announced by seven countries in OPEC+, prices kept climbing. At the close, Brent crude futures settled at $114.44 a barrel, up 5.80% from the previous session, while U.S. West Texas Intermediate futures rose 4.39% to $106.42.
 

Still, the impact on spot prices remains unclear. The Dubai crude spot market — a benchmark for South Korea’s Middle East crude imports — has not yet fully reflected the heightened tensions, and the same is true for Singapore’s MOPS oil product prices.

With the fifth round of the fuel price-cap system set to take effect May 8, the government’s calculations have become more complicated. A key reason for holding the benchmark steady in the third and fourth rounds was stable international oil prices. But with crude above $100 a barrel and Middle East risks rising, the outlook has become harder to predict, making it difficult to maintain the previous freeze, the report said.

Retail prices have continued to rise despite the government’s freeze. As of 2 p.m., Opinet data showed the national average gasoline price at 2,011.42 won per liter and diesel at 2,005.46 won, up 0.38 won and 0.25 won, respectively, from the previous day.