NH Financial Group Research: 1-Year Iran War Could Push Korea's Inflation Up 4%p, Dollar to 1500 Won

An analysis suggests that if the Iran conflict persists for a year, South Korea's inflation rate could surge by up to 4 percentage points and the exchange rate could exceed 1,500 won, necessitating thorough preparation for households and businesses.

The NH Financial Research Institute, in its report titled 'Changes in the Business Environment and Response Points by Iran War Development Scenarios' released on March 17, 2024, analyzed the changes in economic indicators due to a prolonged war. The institute categorized the duration of the Iran war into three scenarios: one month, three months or more, and a year or long-term continuation, to assess the economic impact.

The report forecasts that if the Iran war continues for three months or more, South Korea's economic growth rate could be lowered by 0.3 percentage points this year. In the worst-case scenario of a year-long conflict, growth is projected to fall to the 0% range, with consumer price inflation expected to rise an additional 2.0-4.0 percentage points due to soaring raw material prices and a sharp increase in the exchange rate, pushing the won-dollar exchange rate to over 1,500 won.

Meanwhile, according to Bank of Korea statistics, the import price index in February rose 1.1% from the previous month to 145.39, marking the eighth consecutive month of increases. This was influenced by a rise in international oil prices, with the average price of Dubai crude in February reaching $68.40 per barrel, a 10.4% increase from the January average of $61.97.