For South Korea’s industrial heartland, the past few weeks have felt like a slow-motion crisis. On March 18, 2026, Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul stood before a tense emergency economic ministerial meeting at the Government Seoul Office. His message was clear: the country’s vital supply of naphtha—a cornerstone of the petrochemical industry—was in jeopardy, and the government was moving swiftly to shore up its defenses.
The source of this turmoil? Escalating tensions in the Middle East, most notably Iran’s blockade of the Strait of Hormuz. This single chokepoint is the passageway for about 54% of South Korea’s naphtha imports, and its closure has sent shockwaves through supply chains. According to Chosun Ilbo, the disruption has already driven naphtha prices skyward: as of March 11, the Japanese import price for naphtha reached $1,009 per ton—up a staggering 44.8% from the previous week and 67.2% higher than at the start of the year.
“As the Middle East situation has persisted for more than two weeks, the shock to supply chains for petroleum and raw materials continues, with burdens accumulating across economic sectors,” Koo told reporters, as quoted by Seoul Finance. “The key to crisis response is timing. We will swiftly implement all available policy measures and promptly prepare supplementary budgets to alleviate burdens on citizens and industries.”
With the supply of this essential feedstock at risk, the government made a decisive move: naphtha would be temporarily designated an ‘economic security item.’ This status, established under the Supply Chain Stabilization Act, is reserved for commodities whose supply is particularly vulnerable to foreign disruptions. The designation allows authorities to closely monitor supply trends, address corporate difficulties, secure alternative import sources, and, if necessary, restrict exports to protect domestic needs.
The government’s plan goes beyond monitoring. At the same March 18 meeting, Koo announced the creation of a special ‘Middle East damage response support’ program within the supply chain stabilization fund. This initiative will provide 1.5 trillion won (roughly $1.1 billion) in financial support to companies hit hardest by the crisis. The support includes subsidies to offset the higher costs of alternative imports, emergency operating funds, and preferential interest rates up to 2.3 percentage points for businesses heavily dependent on Middle East naphtha. The government also promised to strengthen price controls on petroleum products, ensuring that price reductions by refiners are quickly passed on to consumers and that unfair practices like hoarding or sales avoidance are met with strict enforcement.
But the numbers tell a sobering story. Munhwa Ilbo reports that the impact is already being felt at the industrial level. The Yeosu National Industrial Complex, which produces about half of the country’s ethylene—a basic material often called the “rice” of industry—faces the real prospect of a shutdown as early as March 24. Yeocheon NCC, a key naphtha cracking center (NCC) in Yeosu, declared force majeure on March 4, citing events beyond its control, and lowered its plant operation rate to 66%. Force majeure, a rarely invoked clause, exempts companies from liability when contract fulfillment becomes impossible due to events like war or natural disasters.
Other major players are also on edge. Hanwha Solutions, a downstream customer of Yeocheon NCC, has notified its own customers of the possibility of force majeure but insists it has enough supply to last through the first half of the year. LG Chem and Lotte Chemical, two other giants in the sector, are operating at 60% and 54% capacity, respectively, and may face shutdowns by the end of March. Typically, plants running below 70% capacity are forced to halt operations, but companies are pushing through losses to keep domestic supply afloat. The critical window to avoid a full shutdown, according to the Yeosu Chamber of Commerce, is between March 24 and March 31.
The government’s emergency measures include the release of 22.46 million barrels from the national strategic oil reserves. Yet, as Munhwa Ilbo points out, this is only a temporary fix: it covers just 7-8 days of domestic crude consumption, and with naphtha yields at about 20%, it amounts to less than half the country’s daily naphtha needs. The Middle East, which used to account for 60% of South Korea’s naphtha imports, has effectively gone dark.
“If the crisis drags on, downstream factories will inevitably have to halt operations as well,” warned Han Moon-sun, chairman of the Yeosu Chamber of Commerce, in comments to Munhwa Ilbo. The value chain is intricate: naphtha is cracked into ethylene and propylene, which then become synthetic resins and fibers, and ultimately find their way into everything from packaging and construction materials to tires, automobiles, and electronics. Large manufacturers have raw material inventories to last over two months, but small and medium-sized enterprises face existential threats—some are even contemplating dismantling their factories if the situation doesn’t improve.
Meanwhile, the government is not only fighting fires in the petrochemical sector. As reported by Chosun Ilbo, authorities unveiled a two-year, 7.54 trillion won initiative to accelerate the commercialization of 246 artificial intelligence (AI) products and services across manufacturing, agriculture, healthcare, transportation, and security. The aim is to strengthen the broader industrial base and reduce reliance on vulnerable supply chains. For 2026 alone, 6.135 trillion won will be spent, with 4.735 trillion earmarked for product development and launch, and the remainder supporting loans and preferential rates for small businesses. Projects range from AI-powered work guides for novice factory workers to autonomous robots that clean up marine debris and AI devices that help prevent falls among the elderly.
In the energy sector, the government is pulling all available levers. Beyond the maximum price system for petroleum products, authorities are considering restricting refinery export volumes, increasing the utilization rate of nuclear power plants, expanding renewables, and even implementing vehicle usage restrictions if necessary. International cooperation is also on the agenda, including the release of strategic oil reserves in line with International Energy Agency (IEA) agreements.
As Deputy Prime Minister Koo summed up, “We will immediately implement all available policy tools, including the designation of economic security items, and swiftly prepare supplementary budgets to reduce the burden on livelihoods and industry.” The stakes are high, and the coming weeks will test the resilience not just of South Korea’s industrial giants, but of its entire economic ecosystem.
With the government mobilizing financial, regulatory, and diplomatic resources, and with industry leaders anxiously watching the calendar, the race is on to secure alternative supplies and keep the nation’s economic engine running—no matter what the next headline brings.