Middle East Tensions Lead to Sluggish South Korean Manufacturing...Chemical Industry Expected to Suffer Greatest Losses

The instability in the Middle East has significantly worsened the outlook for South Korea’s manufacturing sector. The airstrikes by the United States and Israel on Iran are the main causes, and the expected disruption in oil imports is likely to severely impact the chemical industry.

According to industry research institute surveys, the manufacturing outlook index for April was 88, a sharp decline of 29 points from the previous month. The closer the index is to zero, the worse the outlook; falling below 100 marks the first time in 10 months. Both export and domestic demand prospects have declined sharply, and production and investment outlooks are also negative.

By industry, the chemical sector has seen a steep drop in its outlook index due to Middle Eastern political turmoil causing the Strait of Hormuz blockade and difficulties in raw material imports. Most other industries, including automotive, machinery, steel, and electronics, also experienced significant declines, raising concerns about productivity and economic stability.

On the other hand, the semiconductor industry, which had high expectations for a “super cycle,” recorded a relatively optimistic index of 147 in March, but dropped 31 points to 147 in April, remaining comparatively positive compared to other sectors.

If this economic instability persists amid prolonged international political turmoil, it could have deeper impacts on South Korea’s manufacturing industry. The government and industry stakeholders need to closely monitor developments and focus on formulating response strategies.