Issue Middle East war raises costs and squeezes margins across Korea's key industries in the second half

Summary

KIET expects uncertainty in the Middle East to persist through the second half of 2026, turning volatile commodity and energy prices, logistics disruption and supply-chain instability into cost burdens for Korean industry. Automakers face falling demand from the global slowdown and high oil prices, while higher plastic, chemical material and logistics costs raise production costs that are hard to pass on. General machinery faces higher costs for oil, aluminium and other materials, soaring freight rates and a shortage of shipping space, worsening export conditions. Steel has little direct exposure given low trade with the Middle East but faces margin pressure from energy and logistics costs, and reduced Iranian semi-finished steel supply could even open some opportunities. Shipbuilding could see more orders as high freight rates after the Hormuz blockade improve returns on LNG carriers and tankers, although shipping volatility and setbacks to Qatari LNG projects remain. Semiconductors, displays and biohealth see limited direct impact but face some indirect cost pressures.