Brent climbs above $100, pushing South Korea's won toward 1,500 per dollar.
Brent crude rose above $100 per barrel as tensions spread in the Middle East, and South Korea’s foreign exchange market reacted with notable volatility. While the government’s oil price cap has helped to keep domestic fuel costs in check, the surge in oil prices and safety-demand for dollars have pushed the won lower against the U.S. dollar.
On the night of the 14th (Korea time), the won-dollar rate closed at 1,497.50 won per dollar, up 16.30 won from the previous session. In after-hours trading, the rate briefly topped 1,500 won per dollar. The won had breached the 1,500 level intraday earlier on the 4th, reaching as high as 1,505.8 won.
The move reflects a broader risk-off dynamic as Iran signals strong measures around the Hormuz Strait, pushing international crude prices higher and drawing investors toward the dollar as a safe asset.
Data from the Bank of Korea and the Seoul Foreign Exchange Market show the two-week average won-dollar rate for this month at 1,476.9, the highest since the late-1990s foreign exchange crisis. The monthly high in March 1998 was 1,488.87, providing a benchmark for context. Last week’s weekly average was 1,480.7, the highest since the second week of March 2009 (1,504.43).
In terms of volatility, the daily swing in the won has averaged 14.24 won, the largest such move since May 2010, when the swing reached 16.3 won. This underscores how rapidly the market has moved as geopolitical tensions intersect with commodity prices.
The won’s decline this month stands at about 3.84% through the 14th. Among the six major currencies that make up the dollar index, the euro (-3.29%), the yen (-2.39%), and the pound (-1.85%) also weakened, but not as steeply as the won. Only the Swedish krona (-4.49%) fared worse among major peers.
Korea’s economy is highly dependent on oil imports, making it particularly vulnerable to oil shocks. Foreign investors have also been net sellers in the domestic equity market, unloading KRW 13.3274 trillion this month, a factor amplifying the won’s weakness.
Lee Nak-won, aFX derivatives specialist at NH Nonghyup Bank, said that if oil remains around the $100 per barrel level, a 1,500 won per dollar exchange rate could become the new normal for a period.
Why this matters to the United States: Korea is a key regional ally and a major global hub for technology and manufacturing. Currency volatility can influence import costs for components and energy, with potential effects on inflation and corporate pricing for American firms. Shifts in Korea’s financial markets can also affect supply chains for semiconductors and other high-tech goods that rely on interconnected global markets, making Korean currency moves a relevant signal for U.S. policymakers and investors monitoring risk, inflation, and the health of global energy and technology sectors.