Korea Promised ‘Top-Priority Supply’ Amid Middle East War and the Strait of Hormuz Blockade…A Signal of Energy Supply Chain Realignment?

Article 38 of the United Nations Convention on the Law of the Sea (UNCLOS) guarantees the right of transit passage through international straits.

The Strait of Hormuz is likewise an international strait falling within this provision.

In actual conditions, however, this legal right is being substantially restricted by the following factors.

This is a structural problem that cannot be resolved through increased output, and normalization of supply will be difficult unless stability in the Strait of Hormuz is secured.

The Republic of Korea has a structure in which it relies on the Middle East for approximately 69% of its total crude oil imports, with Saudi Arabia as its largest crude oil supplier and Qatar as a key country for LNG supply.

This structure means that Korea is a strategic market that continuously generates stable, large-scale demand.

In particular, from the standpoint of the Middle Eastern oil-producing countries, the stability of demand is directly tied to fiscal stability, so maintaining a fixed source of demand such as Korea is highly important.

Accordingly, the expression ‘top-priority supply’ is interpreted to mean an intention to clarify priorities in a situation where supply capacity is limited.

Korea’s refining industry, through its advanced upgrading facilities, possesses the capacity to convert high-sulfur, difficult-to-refine Middle Eastern heavy crude into high-value-added petroleum products.

This means that it performs the role of a processing and redistribution hub in the global energy supply chain.

In fact, approximately 68.6% of U.S. jet fuel imports are Korean-made, and Australia likewise relies on Korea for approximately 25% of its petroleum product imports.

This structure is a factor that leads Middle Eastern oil-producing countries to recognize Korea as a key partner connecting them to the global market.

If Korean refiners were to shift their crude oil procurement structure toward light crude such as North Sea Brent or U.S. WTI through future facility conversions, demand for Middle Eastern crude could decline structurally.

This is a significant risk directly tied to a decline in the market share of Middle Eastern oil-producing countries.

Accordingly, it is reasonable to view this ‘top-priority supply’ declaration, beyond signifying a guarantee of supply, as a strategic measure intended to preemptively block the possibility of Korea’s departure from the supply chain and to maintain a long-term trading relationship.

In other words, this is not a courtesy extended in a crisis but an active demand-management strategy intended to maintain market dominance.

The most important characteristic of this situation is that rising energy prices and logistics disruptions are occurring simultaneously.

Rising oil prices lead to increased electricity and gas costs as well as effects on refining and petrochemicals, and this acts as a factor that directly increases the cost burden across major manufacturing industries, including steel, chemicals, and semiconductors.

In addition, delays in transit through the Strait of Hormuz are themselves making crude oil import schedules uncertain, and increased vessel dwell times and route avoidance are leading to higher freight rates.

As a result, companies are placed in a structure in which they simultaneously face the risk of delivery delays, production disruptions, and breach of contract.

In particular, because this crisis takes the form of restricted transport despite the existence of supply, it has the characteristic that significant gaps in risk may arise among companies depending on their inventory management and logistics strategies.