The World’s Narrowest Chokehold
54 kilometers wide.
This waterway, leading from the Persian Gulf to the Arabian Sea, carries about 20 percent of the world’s seaborne crude oil trade daily.
When the Iranian Revolutionary Guard Corps blockaded the Strait of Hormuz on the morning of February 28, 2026, as the US and Iran entered full-scale conflict,
the global economy experienced firsthand how heavy those 54 kilometers were.
The war was foreshadowed. Structurally, at least.
In June 2025, the US, in cooperation with Israel, conducted airstrikes on Iranian nuclear facilities, which ended without a full-scale war, known as the ‘12-Day War’.
However, for the following nine months, negotiations in Muscat, Oman, ultimately failed to bridge the gap between ‘zero enrichment’ and ‘violation of sovereignty’.
From the moment US President Donald Trump sent a letter to Ayatollah Khamenei in March 2025, giving him a 60-day deadline, the clock had already started ticking in a different direction.
And at 9:45 AM on February 28, 2026, ‘Operation Epic Fury’ began.
Part 1. Anatomy of War: 12 Days and 4 Months
A Foreshadowed Clash
Throughout 2025, Iran was under complex pressures of collapse.
Massive anti-government protests, triggered by economic ruin, spread nationwide from the end of the year, and the US officially supported these protesters, hinting at possible military intervention.
Hardliners in Iran responded not with negotiations, but with increased regional presence. The activities of the Houthi rebels and Hezbollah intensified simultaneously.
The direct trigger for the breakdown of negotiations was technical.
The International Atomic Energy Agency (IAEA) detected indications of undeclared, highly enriched uranium being hidden at an undeclared underground facility in Iran.
When the US demanded ‘zero enrichment’, Iran deemed it a violation of sovereignty and left the negotiating table. The logic of airstrikes and counterattacks then fell into the hands of hardliners within the country.
Top-level intelligence provided by Israeli Prime Minister Benjamin Netanyahu to the US accelerated this timing.
On February 28, 2026, the US launched a surprise airstrike.
Airstrikes and a Crisis of Regime Collapse
‘Operation Epic Fury’ resulted in the deaths of Supreme Leader Ali Khamenei and key figures in nuclear negotiations, including Ali Larijani, as well as many military leaders.
Facing a crisis of regime collapse, Iran immediately appointed Khamenei’s son, Mojtaba Khamenei, as the successor Supreme Leader.
The counterattack was comprehensive.
Iran immediately blockaded the Strait of Hormuz.
Simultaneously, ballistic missiles and suicide drones were launched towards 17 US military bases in the Middle East, the US Fifth Fleet base in Bahrain, and Israeli territory.
As Hezbollah attacked northern Israel, Israel bombed Beirut, Lebanon.
This was the largest full-scale war in the Middle East since the 2003 invasion of Iraq.
The asymmetry of the damage was striking.
15 US soldiers were killed, and approximately 200 were injured.
Israel suffered 2 soldiers and 17 civilians killed, with a total of 2,989 injured.
Iran lost 4,000-5,000 soldiers in the airstrikes, with over 190 ballistic missile launchers destroyed and 90 naval vessels sunk or damaged.
Civilian casualties ranged from 390 to 1,298 according to different estimation bodies. In Lebanon, 687 people lost their lives.
While Iran suffered far greater military losses, Iran held the weapon of economic counterattack.
Division of the International Community
The international community’s reaction was starkly divided.
Russia and China strongly criticized the US and Israel as war criminals, citing violations of territorial sovereignty, and abstained on UN Security Council resolutions.
British Prime Minister Keir Starmer clearly stated his opposition to artificial regime change through force, but as British bases in Cyprus and Bahrain became targets of Iranian retaliation, he urgently deployed the RAF for defensive purposes.
The true meaning of this division was not military.
For the first time, an explicit challenge to the US-led security order was expressed on the official stage of the UN Security Council.
It was a declaration of non-support for ‘America’s war’.
Part 2. When the Hormuz Was Closed: An Economic Anatomy of War
The Price of 54 Kilometers
The closure of the Strait of Hormuz caused a short-term surge in international oil prices.
The transmission path of that shock was precise.
First Path: Transportation. The cost of public transportation increased by 17 percent, and airfares and logistics costs surged in tandem. It was akin to a tax being imposed on the very mobility of life.
Second Path: Food. The raw material for nitrogen fertilizer is natural gas. As oil prices skyrocket, the production cost of fertilizer, an energy-intensive industry, immediately rises. Nitrogen fertilizer prices surged by over 30 percent immediately after the war broke out. Food prices worldwide followed with a time lag.
Third Path: Manufacturing. Petroleum is a raw material. Plastics, synthetic fibers, raw materials for pharmaceuticals, paints, adhesives—most of the basic materials for modern manufacturing come from petroleum. The oil price shock drove up the prices of finished goods across the board.
The figures estimated by the US Joint Economic Committee are as follows.
The combination of the Trump administration’s tariff policies and the supply shock from the Iran war led to an average additional expenditure burden of over $3,100 per household from 2025 to May 2026. * $3,100. Approximately half of the median US household’s monthly income.*
Reignition of Inflation in the G20
Looking back at pre-war projections, the average inflation rate in the G20 countries was converging around 2.8 percent.
Central banks were just concluding their tightening cycles from 2022-2024 and preparing for a phase of easing.
The closure of Hormuz reversed this clock.
The average G20 inflation rate soared to 4.0 percent.
The IMF officially warned of a scenario where prolonged high oil prices could lead to a sharp drop in global growth to the 2.0 percent range and inflation exceeding 6.0 percent.
The fear behind this was not mere inflation—it was the return of stagflation, where growth falters and prices rise.
In financial markets, a strong dollar and a decline in asset values occurred simultaneously.
A flight to safety pressured emerging market currencies and sequentially increased the risk of capital outflows.
Part 3. The Price Paid by Korea
The Number 70 Percent
A look at Korea’s crude oil import structure reveals its vulnerability.
Over 70 percent dependence on Middle Eastern crude oil. In peacetime, this figure had been called a ‘stable supply route’ for decades.
When the Strait of Hormuz closed, it became evidence of structural vulnerability.
In the early stages of the war, seven national flag vessels carrying approximately 14 million barrels of crude oil—equivalent to the total daily consumption of Korean households—were detained or isolated due to transit restrictions in the Strait of Hormuz. This triggered red alerts for the operating rates of the refining and manufacturing industries.
The deterioration of the trade balance due to high oil prices and the sharp decline in the won’s value due to the preference for dollars maximized the upward pressure on import prices.
It was warned that if oil prices continued to soar, Korea’s economic growth rate could fall by an additional 0.8 percentage points and inflation could surge by 2.9 percentage points, a stagflation risk.
Translating these numbers again:
Assuming Korea’s economy is operating at a growth rate of approximately 1.8 percent based on 2025 figures, a 0.8 percentage point drop would effectively bring the growth rate down to the low 1 percent range.
In a situation where the demographic structure is deteriorating and domestic demand is already sluggish, this is more than just a statistical figure. It is a number directly linked to jobs and household income.
The Double Pressure on the Petrochemical Industry
The shock to Korea’s petrochemical industry was not simply an increase in costs.
This industry was already under pressure from structural recession even before the war.
China was aggressively lowering prices with a strategy of building massive new facilities, and Korean companies were increasingly losing out in terms of cost competitiveness.
Restructuring was underway, but at a slow pace.
The closure of Hormuz forcibly accelerated this timeline.
Faced with the dual blow of soaring raw material costs, companies were pushed to a critical situation where their restructuring schedules were rapidly brought forward.
The ‘restructuring that had to be done someday’ was transformed into ‘a survival strategy that must be executed immediately’.
This is the true mechanism by which energy supply shocks affect the entire economy.
More than the fact that oil prices rose, the greater destructive power lies in breaking already fragile links.
Part 4. The Islamabad Agreement: An Incomplete Conclusion
Trump’s 80th Birthday Gift
At 5:29 PM on June 14, 2026.
President Donald Trump’s short statement on Truth Social on his 80th birthday read:
“An agreement with the Islamic Republic of Iran has been finalized.”
The very format of the announcement was a signal. Not an official statement from the Ministry of Foreign Affairs, nor a joint press conference by the Secretary of State, but a personal social media account.
Trump framed this not as a diplomatic achievement, but as a personal victory.
The agreement, brokered by Pakistan and Qatar, came to be known as the ‘Islamabad Agreement’ after the capital of the mediating country, Pakistan.
The official signing ceremony for the peace treaty is scheduled to take place in Geneva, Switzerland, on June 19, 2026.
Four C-17 heavy transport aircraft were moved to Geneva to coordinate the delegation led by US Vice President JD Vance.
The Iranian delegation includes Parliament Speaker Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi, who received approval for a proxy signature from Supreme Leader Mojtaba Khamenei.
The fact that Khamenei himself did not stand before the signing table reveals Iran’s negotiation frame—‘Iran’s Supreme Leader has not conceded to this agreement.’
Anatomy of the Agreement: Landmines Hidden Within 14 Articles
The surface of the Islamabad Agreement is neat.
Gunfire ceases on the front lines, the strait opens, and discussions on dismantling the nuclear program resume.
However, juxtaposing the details of each article with what was not agreed upon reveals a different picture.
Military Ceasefire: The US demanded an unconditional, immediate ceasefire and a permanent cessation of Iran’s drone and missile attacks.
The agreement included an immediate and permanent end to hostilities on all fronts. On the surface, it was a US victory.
However, while the phrase ‘all fronts, including Hezbollah in Lebanon’ appears to stipulate Iran’s obligation to control its proxy forces, the implementation mechanism has not been specified.
Strait of Hormuz: The US demanded complete freedom of navigation under international law. Iran agreed to reopen the strait on the condition that the US maritime blockade be fully lifted within 30 days.
However, it maintained the principle that sovereignty over the strait belongs to Iran and Oman. This means Iran retains the legal justification to close it again at any time.
Nuclear Program: The US’s initial demand was physical dismantling. What was included in the agreement was a declarative commitment at the level of reaffirming NPT obligations.
The specific dismantling methods were deferred to technical negotiations for 60 days after signing. In other words, the substantive resolution of the nuclear issue lies outside this agreement.
Sanctions Relief: The US argued for phased relief after the completion of nuclear verification.
Iran secured the priority unfreezing of $12 billion and a suspension of sanctions on oil and petrochemical exports before the start of final negotiations. Money comes first.
Reconstruction Aid: A plan by the US and its Western allies for Iran’s economic reconstruction worth at least $300 billion was presented—this was demanded by Iran.
It is a far cry from the US’s official position.* The feasibility of this item is the most uncertain within the agreement.*
The structural nature of the agreement can be summarized in one sentence: The US succeeded in stopping the gunfire, and Iran succeeded in preserving its nuclear capabilities.
The Agreement’s Biggest Omission: Missiles and Proxies
Ironically, the most significant achievement of the preliminary draft of the Islamabad MOU lies in what was not included in the agreement.
Iran’s missile program and the issue of arming its proxies (axis of resistance) in the Middle East were completely excluded from the main agenda.
Iran demanded this, and the US acquiesced.
Iran secured the justification that its regime’s sovereignty was not violated.
The US secured the political achievement of announcing an end to the war.
As a result, in the Middle East after the Islamabad Agreement,
Iran’s missile capabilities and its arming of proxies like the Houthis and Hezbollah remain legally identical to the pre-war state.
Part 5. The World After: Two Scenarios
The war is not over. The time to prepare for the next phase of the war has begun.
The direction of the global economy after the Islamabad Agreement is divided into two branches.
Scenario A: Resolution of Geopolitical Risks and Entry into De-inflation
If the Geneva signing ceremony concludes smoothly, and a compromise is reached in the 60-day technical negotiations where Iran chemically dilutes high-enriched uranium within its territory under constant international organization surveillance, the global oil market can stabilize quickly.
As oil prices settle in the $70-$80 per barrel range, supply chain inflationary pressures will ease.
The G20 CPI inflation rate will fall back below 3.0 percent, and food and logistics costs will stabilize.
With price stability confirmed, the US Federal Reserve will have the justification to abandon further tightening measures, such as interest rate hikes, and shift to accommodative monetary policy.
As borrowing costs decrease, large-scale infrastructure investments by Big Tech, such as Alphabet’s $80 billion bond issuance and Amazon’s borrowing structure for AI data centers, can be executed at stable interest rates.
The momentum of technological innovation will continue.
For the Korean economy, the stabilization of the won-dollar exchange rate will normalize import prices and lead to a recovery in real household income.
GDP growth could rebound by 0.5 percentage points.
There will be time to begin investing in diversifying the energy portfolio to move away from dependence on Middle Eastern oil.
The preconditions for this scenario are: that hardliners within Iran allow the implementation of the agreement, that Israel refrains from unilateral military action, and that the US actually implements the unfreezing of $12 billion in assets.
-> The probability of all three conditions being met is unlikely to exceed 50 percent, even optimistically.
Scenario B: Non-Implementation of the Agreement and Recurrence of Armed Conflict
The Islamabad Agreement is fraught with seeds of collapse.
The first minefield is the nuclear technology negotiations.
The US maintains a ‘measure for measure’ stance, stating that no funds can be released until Iran physically dismantles its nuclear facilities completely and undergoes verification.
The Iranian Foreign Ministry is employing a brinkmanship tactic, threatening that if the $12 billion asset freeze and oil sanctions suspension, as specified in the MOU, are not actually implemented, they will not tolerate even a single gram of uranium processing. If this deadlock is not resolved, the 60-day technical negotiations will end before they even begin.
The second minefield is the Hormuz transit fee.
Iran insists on imposing an independent ’transit fee (service charge)’ on merchant ships passing through the strait.
This directly violates US federal law and international shipping treaties.
If transit fee collection actually begins, the US will have legal grounds to immediately restore the maritime blockade.
The third, and most direct, risk factor is Israel.
Prime Minister Benjamin Netanyahu received no prior notification or information sharing until President Trump announced the imminent ceasefire agreement.
The sense of betrayal was publicly expressed.
Israel is determined to completely reject an agreement that omits provisions for the dismantling of Iran’s missile capabilities.
It also strongly opposes military withdrawal from Lebanon, Hezbollah, and occupied areas of Syria.
If the Israeli military launches large-scale preemptive strikes again in Syria and the southern outskirts of Beirut, Lebanon,
Iranian hardliners and the Revolutionary Guard Corps will declare the negotiations void and retaliate with a full-scale response.
The economic consequences of the negative scenario are as follows:
International oil prices (WTI) to exceed $125-$130 per barrel and remain high. US inflation expectations to exceed 4.8 percent. The Federal Reserve to completely withdraw its year-end interest rate cut plan, extending high interest rates until early 2027. Korea’s trade deficit to become entrenched and economic recession.
If oil prices remain at $130 per barrel for an extended period, this is not just an energy price issue.
Stagflation, where growth falters and prices rise, becomes the global standard.
A strong dollar and capital outflows will recur. -> In this case, it would be the third global shock, following the 2008 financial crisis and the 2022 energy crisis.
Part 6. What Korea Should Prepare Now
We should not hastily dismantle our emergency preparedness posture by being overly optimistic about the Islamabad Agreement.
This is not a general warning from experts. The very structure of the agreement prohibits it.
A paradigm shift is needed, one that regards geopolitical risks not as short-term events but as constant structural variables.
This shift must occur simultaneously on three fronts.
Redesigning Supply Chains: From Just-In-Time to Just-In-Case
For decades, efficiency has been the strength of Korean manufacturing.
Minimizing inventory, optimizing supply chains, and lowering costs—this is the logic of ‘Just-In-Time’ supply chains. This method works when supply is stable.
When Hormuz closed, this logic was rendered ineffective. Production stopped because there were no inventories.
‘Just-In-Case’ supply chains adopt resilience as their design principle, not cost efficiency.
To reduce the 70 percent dependence on Middle Eastern crude oil, we need to diversify our oil asset portfolio to include North American shale oil, North Sea fields in Norway, and African regions.
Policy funding and proactive allocation of emergency reserves are needed to enforce diversification of raw material procurement sources.
This comes at a cost. The cost is likely to be less than the price paid by the Korean economy from February to June 2026.
Financial Soundness: Assuming a $100 Oil Price Scenario as the Baseline
Corporate financial strategy baselines must be changed.
Under a scenario of sustained oil prices of $100-$130 per barrel, impairment losses on assets and hedging ratios for foreign exchange derivatives must be regularly reviewed.
Emergency credit lines must be secured to prevent short-term foreign currency liquidity shortages from spilling over into reduced physical operating rates.
The ’low oil price baseline’ is not optimism, but a blind spot.
Cybersecurity: A New Battlefield for Energy Infrastructure
In the context of military tensions in the Middle East, state-sponsored cyberattacks targeting power grids and oil transport control systems are rapidly increasing.
Integrated security management for national critical infrastructure companies such as refining, gas, and shipbuilding must be strengthened, and real-time monitoring systems for alternative sea logistics routes must be established.
Hybrid strategies, combining physical supply chain disruption and cyberattacks, have already been verified in the 2026 war. They will become more sophisticated in the next conflict.
Epilogue: The Strait Has Reopened
On June 14, 2026, immediately after Trump’s announcement, the Strait of Hormuz reopened.
Tankers began to move. International oil prices fell. The stock market rose. The world breathed a sigh of relief.
However, during the months when the strait was closed, the world learned:
That 20 percent of the global energy supply chain is concentrated in a 54-kilometer-wide waterway,
That the country controlling that waterway can directly influence global prices and growth rates,
And that despite knowing these facts, the world had not prepared alternatives.
The Islamabad Agreement may have ended the war. But this structural vulnerability is not written anywhere in the agreement.
Will the world be surprised again the next time the strait closes?
References
- Joint Economic Committee (JEC), “Report on the Economic Impact of Trump Tariffs and the Iran War on Households,” May 2026.
- HRANA & Hengaw, Iran Human Rights Organizations, “Compilation of Civilian Casualties in the 2026 US-Iran War,” March-May 2026.
- International Monetary Fund (IMF), “World Economic Outlook Update 2026: Growth and Inflation Forecasts by Middle East Conflict Scenario,” April 2026.
- International Atomic Energy Agency (IAEA), “Verification Report on Iran’s Nuclear Activities—Indications of Undeclared Highly Enriched Uranium Concealment,” November 2025.
- TruthSocial, President Donald Trump’s Post, June 14, 2026.
- Ministry of Foreign Affairs of Pakistan Official Statement, “Mediation Process and Content of the Islamabad Agreement,” June 14, 2026.
- Ministry of Foreign Affairs of Iran Official Position, Statement by Foreign Minister Abbas Araghchi, June 14, 2026.
- Bank of Korea, “Analysis of the Impact of Soaring Oil Prices on the Korean Macroeconomy,” March 2026.
- Ministry of Trade, Industry and Energy, “Emergency Plan for Response to Crude Oil Supply Disruptions in the Middle East,” March 2026.
- US Energy Information Administration (EIA), “Hormuz Strait Traffic Volume and Oil Price Impact by Closure Scenario,” 2025.
- S&P Global Commodity Insights, “Hormuz Closure: Tanker Market Disruption Analysis,” March 2026.
- International Energy Agency (IEA), “Responding to Energy Supply Shocks: Strategic Petroleum Reserve Releases and Alternative Route Assessment,” March 2026.
- Bloomberg, “Iran Nuclear Talks: Full Text of Islamabad MOU Key Clauses,” June 14, 2026.
- Reuters, “Netanyahu’s Reaction to US-Iran Ceasefire: Diplomatic Fallout Analysis,” June 15, 2026.
- Korea National Oil Corporation, “Status of Middle Eastern Crude Oil Dependence and Supply Chain Diversification Strategy Report,” December 2025.
- Security Council Records, “UN Security Council Vote Results on Resolution Regarding Military Intervention in Iran,” March 2026.
This article is based on publicly available information and official statements as of June 2026. The implementation of the Islamabad Agreement and subsequent political and economic developments are subject to ongoing changes since the time of writing.