Nomura Economist: Prolonged Iran Conflict Could Prompt South Korea Rate Hike

Nomura Securities economist Jeong Woo Park has indicated that if the conflict in Iran extends beyond three months, the likelihood of a rate hike by the Bank of Korea may increase. According to Jin10, rising oil prices have heightened the central bank's sensitivity to inflation, and prolonged tensions in the Middle East could push inflation above the central bank's 2% target, potentially triggering a rate increase. Despite the economic drag from rising oil prices, strong overseas demand for semiconductors and domestic fiscal support appear to limit downside growth risks. Nomura maintains its forecasts for South Korea's GDP growth and inflation in 2026 at 2.3% and 2.4%, respectively, both higher than the Bank of Korea's projections.