Strait of Hormuz disruptions threaten South Korea's SME exports

Small and medium-sized exporters in South Korea are increasingly reporting damage and difficulties tied to the Middle East tensions linked to the United States, Israel and Iran. As of noon on the 18th, the Ministry of SMEs and Startups recorded 232 reports related to the Middle East situation, up 106 from the previous week. The ministry has been collecting online submissions since March 28 and also through 15 regional export support centers via phone and in-person channels.

Of the reports, 171 were categorized as damages or difficulties and 61 as concerns. Among damages and difficulties, transportation disruptions were the most common, cited in 116 cases (67.8%), followed by higher logistics costs in 63 cases (36.8%), contract cancellations or suspensions in 59 cases (34.5%), unpaid invoices in 54 cases (31.6%), disruptions to business travel in 37 cases (21.6%), and other issues in six cases (3.5%). Among concerns, transportation disruptions were reported in 47 cases (77.0%), with other concerns in 12 cases (19.7%) and loss of contact in six cases (9.8%).

The Ministry notes a shift in the week-long trend: damages and difficulties now account for 95 reports (89.6%), up from earlier a higher share of concerns. By contrast, concerns stood at 11 cases (10.4%) in that prior period. Within the country-specific data, reports connected to the United Arab Emirates and Saudi Arabia have grown as a share of total damage reports, rising to 69.8% from 59.5% a few days earlier, while Iran and Israel accounted for comparatively fewer cases.

Examples cited by the ministry illustrate the kinds of pressures companies face. One SME has been notified of potential extra logistics costs if the Hormuz Strait remains blocked and expects possible delay penalties due to slower delivery of goods destined for export. In the Iran region, a local financial network outage and communications disruptions are delaying collection of accounts receivable indefinitely, affecting a company that had relied heavily on Middle East exports. Another firm halted shipments abroad entirely, forcing nearby vessels to divert to third-country ports and incur additional transport costs.

To address the ongoing, long-term disruption, the ministry is discussing comprehensive support measures to stabilize raw material supply chains and to mitigate rising oil and consumer prices that threaten small businesses. On March 17, it announced an “emergency logistics voucher” to ease exporters’ burdens, with ongoing intake starting March 20. Applicants can expect a response within three days of submitting their request.

For U.S. readers, the developments matter because South Korea’s export-driven economy relies heavily on global shipping routes and energy-related costs. Disruptions in Middle East trade lanes and the Hormuz Strait can ripple through supply chains that source components and finished goods from Asia and beyond. In addition, the situation highlights how geopolitical shocks can tighten logistics costs, delay payments, and affect contract terms for small manufacturers, potentially influencing global markets, pricing, and the timing of goods that reach American distributors and consumers.