SEOUL, July 07 (AJP) - South Korea's factories just lived through the most violent oil shock in history, and the strange part is that the country posted record exports while it happened. The war in Iran and the closure of the Strait of Hormuz, the narrow waterway carrying about a fifth of the world's oil, did not hit Asian industry evenly in the first half of 2026. It split it. Semiconductors sailed through on artificial intelligence demand, automobiles took a glancing blow, and petrochemicals, the industry most directly chained to crude oil, came close to breaking.
The numbers tell the story of a two-track economy. South Korea's exports hit a record $87.75 billion in May, up 53.2 percent from a year earlier, driven almost entirely by semiconductor shipments that soared 169.4 percent to $37.16 billion, according to trade data. In the same month, auto exports fell 5.9 percent, and the country's petrochemical crackers were running at minimum rates after a wave of force majeure declarations, the legal notices companies issue when events beyond their control make it impossible to honor contracts.
How the same shock produced such different outcomes comes down to what each industry actually consumes, and the first half of this year amounted to a live experiment nobody wanted to run.
The largest disruption in history
The experiment began on Feb. 28, when the United States and Israel launched an air war against Iran. Tehran retaliated by effectively sealing the Strait of Hormuz with missile attacks, ship boardings, and sea mines. Tanker traffic collapsed. Brent crude rose about 65 percent in March alone, roughly $46 a barrel, the largest monthly gain ever recorded, before peaking above $188 in late April. Fatih Birol, who heads the International Energy Agency, called it the "largest supply disruption in the history of the global oil market."
Global oil supply plummeted by 10.1 million barrels per day in March to 97 million, according to the International Energy Agency (IEA). For Asia, which took delivery of nearly 70 percent of the crude passing through the strait before the war, the pipeline to its industrial base had been cut.
Petrochemicals take the direct hit
Nowhere did that cut land harder than on petrochemicals, the industry that turns oil into the plastics, fibers, and chemicals inside nearly everything manufactured. Asian crackers, the giant plants that break down oil-derived feedstock into building blocks like ethylene, depend on the Middle East for 70 to 80 percent of their naphtha, and roughly 80 percent of Asia's seaborne naphtha imports came from the Gulf in 2025, according to data from the price reporting agency Independent Commodity Intelligence Services.
When the strait closed, naphtha prices jumped from $776 per metric ton on March 6 to more than $1,000 within a week, according to Masanori Kawakami, a petrochemical industry expert based in Japan who spoke to Chemical and Engineering News. By mid-March, Independent Commodity Intelligence Services (ICIS) had counted 31 force majeure or sales allocation announcements across Asia and the Middle East. Roughly half of global polyethylene capacity was either offline or constrained by feedstock shortages at the peak and polyethylene prices surged 50 to 80 percent in some markets within three weeks, according to assessments cited by BIC Advisory Group.
South Korea, which imports around 70 percent of its crude oil and half of its naphtha through the strait, watched its chemical sector buckle plant by plant. Yeochun NCC declared force majeure. LG Chem shut its No. 2 cracker at Yeosu and cut all of its naphtha-fed crackers to 60 percent minimum operating rates. The government responded by restricting naphtha exports and temporarily designating the feedstock a supply-chain security item, while officials discussed importing Russian crude and naphtha to stabilize supply, according to Reuters.
The damage was regional, not just Korean. Mitsubishi Chemical cut ethylene output at its Kashima and Mizushima plants in Japan, a country that imports more than 60 percent of its naphtha, about 70 percent of it from the Middle East. A Shell joint venture cracker in Huizhou, China, shut down and suspended polyethylene shipments indefinitely. Formosa Petrochemical declared force majeure in Taiwan and ran its Mailiao crackers at around 70 percent. The IEA's April Oil Market Report found that petrochemical feedstocks showed the most immediate effects of the war of any product category, with LPG and naphtha demand falling 8 and 9 percent year on year in April, against declines of about one percent for transport fuels.
The pain mattered more because South Korea's petrochemical industry entered the war already wounded, squeezed for years by Chinese overcapacity and thin margins. The feedstock shock did not create the crisis. It accelerated one that was already underway.
Chips sail through on AI demand
Semiconductors lived in a different world entirely. Chips are made from silicon, not oil, and the AI investment boom proved far stronger than any energy headwind. South Korean semiconductor exports reached $31.9 billion in April, up 173.5 percent from a year earlier and the highest figure ever recorded for that month, before setting the all-time record in May. The IEA itself noted that South Korea's economy remained resilient through the turmoil, buoyed by chip shipments that exceeded $30 billion for the first time in March.
That is not to say chips were untouched. Fabs consume enormous amounts of electricity, and energy costs rose across the board. Statistics Korea reported that semiconductor production fell 10 percent month on month in May, but officials attributed the drop to production capacity reaching its limits and to shipment timing, not to the oil shock, and forecast a recovery in the second half as new fabs come online. The distinction matters: the one industry that stumbled statistically did so because it was running too hot, not because the war starved it.
Autos caught in the crossfire
Automobiles landed in between, hit hard enough to hurt but through so many channels at once that the oil shock is difficult to isolate. South Korean auto exports fell 5.5 percent in April and 5.9 percent in May, declines that trade data attributed partly to wartime shipping disruptions and partly to Korean carmakers shifting production to the United States in response to Washington's tariff policy. Hyundai Motor temporarily halted production of its Ray and Morning models in late March, though the immediate trigger was a fire at a parts factory in Daejeon that collided with the broader supply chain chaos, according to the Seoul Economic Daily. Domestic passenger car sales fell 3.4 percent in May as fuel prices climbed.
There was also a quieter, second-order threat to the auto industry's future. Synthetic graphite, the material used in electric vehicle battery anodes, is made from petroleum coke, a byproduct of oil refining, and the World Economic Forum warned in April that refiners chasing high-value fuels during the price rally could tighten the supply on which battery production depends.
The stress spread well beyond the three sectors. GS Caltex cut its daily crude refining volume from 800,000 barrels to 675,000, according to the Seoul Economic Daily. Airlines including Air Premia and Aero K suspended routes as jet fuel costs soared. The government rolled out a 26.2 trillion won extra budget, about $17 billion, to cushion the shock, and President Lee Jae-myung launched a public energy-saving campaign.
A market that will not go back
The acute phase has now passed. A fragile ceasefire between the U.S. and Iran took hold in April, and after weeks of contradictory claims about whether the strait was open, tanker traffic has partially resumed. Brent crude was trading at $72.45 per barrel on June 29, near pre-war levels and down from the wartime high above $188. The World Bank expects Brent to average $86 this year, assuming Middle East exports recover to near pre-war levels by the fourth quarter.
But the market that South Korean industry now buys from is not the one it knew in January. Global inventories were drawn down sharply during the crisis, and importers across Asia are expected to rebuild stocks at a higher cost. Insurance premiums for Gulf transits remain elevated, mine risk lingers, and Tehran is pressing to convert its demonstrated leverage over the strait into lasting control over who passes through it, including a possible toll system.
According to CNBC's report citing Nikos Petrakakos, managing director of investments at the shipping investor Tufton Investment Management, on June 29, shipping traffic through the strait remains nowhere near pre-war levels, and Iran's new position is unlikely to be surrendered. "I don't see Iran going back to where it was before," he said.
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