Prof Dr M Munir
2026 US-Iran war and blockade of Strait of Hormuz led to impulsive disruptions in the price of global energy supply resulting in economic instability both in the global north and global south.
The war generated inflation pressures, currency depreciation and stock market instability. South Korea was supposed to be one of most affected country from the energy supply crisis as its 70% crude oil and 30 % Gas/LNG supplies are from Middles East. But, conversely to this assumption, South Korea demonstrated an astounding resilience in the face of the 2026 global energy supply challenges. The main focus of this study is to analyses how South Korea sustained its economic resilience vis-à-vis global energy crisis.
South Korea managed to withstand the 2026 energy shock without losing macroeconomic stability, as its GDP growth remained steady. Despite the global energy crisis, the IMF projected South Korea’s growth at 1.9%, slightly higher than the OECD forecast of 1.7%, reflecting strong resilience. The trade performance was particularly impressive, with exports reaching a record $87.75 billion in May 2026 and expected to surpass $900 billion by year’s end. A global surge in artificial intelligence demand significantly boosted semiconductor exports, with DRAM shipments nearly tripling and semiconductors alone generating $37.16 billion, a 169.4% increase. The five-month trade surplus reached $101.9 billion, exceeding the previous 2017 record. This performance illustrates how South Korea’s economy remained stable amid crisis, driven by a semiconductor boom, strong government intervention and a diversified export base. Overall, tech-led exports and policy buffers helped prevent a severe recession despite global energy disruptions.
Several factors contributed to South Korea’s sustained economic resilience amid Middle East energy disruptions. The first and most significant factor was strong technology-driven exports, particularly in semiconductors and AI hardware. Global demand for high-quality chips and advanced computing components remained exceptionally high, supporting export growth even during the crisis. South Korean firms are leading exporters of memory semiconductors, especially High Bandwidth Memory (HBM), which is essential for training complex AI models. In addition, demand for AI hardware components such as solid-state drives (SSDs) and other server-related peripherals more than tripled, reflecting the global AI expansion. Semiconductor exports reached a record $37.16 billion in a single month, marking a 169.2% year-on-year increase. Overall Information and Communication Technology (ICT) exports climbed to $47.79 billion in a single month, largely driven by AI-related chips. This technology-centric export base consistently offset trade pressures and helped maintain strong current account surpluses.
The second factor of economic resilience in face of Middle East energy shock was government response in the form of government-led emergency budgets. The policy response to the energy price shock prioritized targeted support to vulnerable households and businesses. Phasing out energy price ceilings, fuel tax cuts and export controls improved energy efficiency and reduce fiscal pressures. The Korean Government announced a $17.3B supplementary budget to support consumers and companies hit by the war. The other measures taken include fuel price ceilings rolled out every 2-4 weeks since March 13, 2026, bans on hoarding petroleum and subsidies for diesel used by freight trucks/buses/taxis.
The third factor behind South Korea’s economic resilience during the Middle East energy shock was its diversified energy strategy. The government reduced vulnerability by expanding crude oil sourcing from the Americas and Southeast Asia while accelerating the use of nuclear and renewable energy as long-term buffers. Policy measures included domestic fuel price ceilings, a supplementary budget and shifts in crude procurement toward countries such as the USA and Kazakhstan. In addition, the Cheonghae naval unit was deployed to escort tankers through high-risk routes like the Red Sea, while diplomatic efforts secured alternative supplies from Saudi Arabia, Oman, Algeria, Congo and Libya. Strategic oil reserves were also released to stabilize domestic markets. As a result, South Korea reduced its reliance on the Strait of Hormuz from 70% to about 55%, lowering exposure to geopolitical chokepoints. Simultaneously, it advanced its energy transition by restarting nuclear reactors and increasing renewables above 20%.
At least this year’s experience in South Korea suggests that diversified suppliers, a credible fiscal cushion and an export based economy to withstand requisites of trade are ways to make the difference between vulnerability and fragility. Seoul has bent. It has not broken. Resilience in South Korea’s economy came from AI/semiconductor exports, its rapid policy response for providing relief to its people and diversifying its energy strategies. Consequential to signing of a deal by President Trump on June 18, 2026 and the reopening the Strait of Hormuz, led to oil prices falling to their lowest since the Iran war. Notwithstanding this development it is hoped that South Korea’s strategy would continue to focus on medium-term restructuring: diversifying supply chains, transitioning to a post-plastic economy and accelerating renewable energy resources.
—The writer is Dean Faculty of Social Sciences, MY University Islamabad.
