South Korea Consumer Prices Hit 21-Month High in April

South Korea's consumer prices rose 2.6 percent year-on-year in April, marking the fastest inflationary pace in 21 months. The surge was primarily driven by a 21.9 percent jump in petroleum products, with diesel and gasoline increasing by 30.8 percent and 21.1 percent respectively. These spikes followed the effective closure of the Strait of Hormuz after U.S.-Israeli strikes on Iran in late February disrupted global oil supplies. Higher fuel costs also pushed international airfares up by 15.9 percent and industrial product prices up by 3.8 percent.

To mitigate these costs, the Government of South Korea implemented temporary nationwide fuel price caps and tax cuts in March. Officials estimate these measures reduced overall inflation by 1.2 percentage points. While agricultural prices fell 0.5 percent due to favorable weather, core inflation—excluding volatile food and energy prices—rose 2.2 percent.

The Bank of Korea, which has maintained a benchmark interest rate of 2.5 percent since mid-2025, now faces pressure to raise rates to combat persistent inflation. Deputy Governor Ryoo Sang-dai indicated that hikes may be necessary, potentially starting in July. However, Governor Shin Hyun Song warned that higher prices could weigh on fragile domestic demand. Meanwhile, U.S. President Donald Trump announced a brief pause in ship escort operations in the Strait of Hormuz, citing progress toward an agreement with Iran, which contributed to a drop in oil prices.