Ceasefire hopes rise as energy risks persist

U.S. President Donald Trump said March 31 that U.S. forces would leave Iran “very soon,” adding that the conflict in the Middle East could end within two to three weeks.

Iranian President Masoud Pezeshkian said Tehran is willing to end the conflict if safeguards are in place to prevent renewed aggression. As expectations for a prolonged war eased, global markets rallied on growing optimism that hostilities could end sooner than expected. Analysts, however, warn that disruptions to energy supply chains could continue to weigh on the global economy.

Trump’s remarks appeared to reflect mounting domestic pressure. Average gasoline prices in the United States have risen above $4 per gallon, a level widely viewed as politically sensitive. U.S. stocks recorded their largest daily gain in 10 months following his comments, while South Korea’s benchmark Kospi index surged 8.44 percent on April 1, extending gains across global markets.

Uncertainty remains over Iran’s effective blockade of the Strait of Hormuz, a key route for global oil and gas shipments. Trump said the United States has “nothing to do” with securing the passage, raising the possibility that U.S. forces could withdraw even if normal shipping is not restored.

If that happens, countries heavily dependent on the route, including South Korea and Japan, may need to negotiate directly with Iran or pay transit fees reportedly set at $2 million per vessel to maintain energy supplies.

Damage to production facilities in Middle Eastern oil-producing countries is also expected to take time to repair. Even if the conflict ends soon, South Korea, which relies on the region for about 70 percent of its crude oil and 20 percent of its natural gas, could face supply constraints into the winter.

Higher oil prices are likely to feed into inflation with a lag. Efforts by the Bank of Korea to curb price pressures through higher interest rates would add to the burden on households already carrying heavy mortgage debt. Under these conditions, meeting this year’s economic growth forecast of 1.7 percent, recently lowered by the Organization for Economic Cooperation and Development, may prove difficult.

The government said it will raise the energy security alert level from “caution” to “alert” on April 2 and introduce an odd-even vehicle system for public institutions. A five-day rotation system will also apply to private vehicles using public parking facilities. With the effects of the Middle East crisis likely to persist, households and businesses may need to brace for continued strain.