Iran War Drives South Korea Inflation to 30-Month High

By Staff, Agencies

South Korea’s inflation rose in June to its highest level in two and a half years, increasing pressure on the Bank of Korea to tighten policy as strong exports and rising costs kept price pressures elevated amid the US–"Israeli" war on Iran, the Wall Street Journal reported.

Official data released on Thursday showed that the consumer price index rose 3.2% year-on-year in June, up from 3.1% in May and above the central bank’s 2% target for the second consecutive month.

The reading marked the fastest annual increase since December 2023 and matched the median estimate in a WSJ survey of seven economists.

On a monthly basis, consumer prices increased 0.1% in June after rising 0.5% in May.

Notably, core inflation, which strips out volatile food and energy prices, stood at 2.5% year-on-year and remained flat from the previous month, suggesting that underlying price pressures remain persistent.

Fuel prices were a key driver of the increase, with petroleum products surging annually, including a 23% rise in gasoline and a 34% jump in diesel in June, according to ministry figures.

The data point to continued inflationary pressure from earlier increases in raw material costs, as well as the impact of a weaker won.

Although the US-Iran ceasefire has helped ease energy-related concerns, cost pressures are still filtering through South Korea’s economy.

The latest figures are expected to strengthen the case for a rate increase at the Bank of Korea’s next policy meeting on July 16.