South Korea’s fuel price cap in response to rising oil prices

South Korea is poised to impose price caps on energy products for the first time in 30 years, as oil prices soared on Monday due to the war in Iran.

At a briefing on Monday, President Lee Jae-myung said the government would “soon introduce” an energy price cap, adding that Seoul would explore ways to diversify its energy import sources, according to a TV broadcast.

Oil prices rose on Monday as major Middle Eastern producers cut output and the US called for Tehran’s “unconditional surrender” over the weekend.

Brent Futures rose 13% to $104.7 US West Texas Intermediate crude futures It jumped 30% to $118.46, before paring gains of 13% to $102.4 in last trade. The 30% jump was the biggest one-day gain since late 1988, according to LSEG data.

“We need to quickly introduce and boldly implement a maximum price system for petroleum products, which have seen a sharp price increase recently,” Lee said.

Average gasoline prices in Seoul surpassed 1,900 won ($1.28) per liter on Friday for the first time in nearly four years, and rose to 1,945 on Sunday, South Korean media outlet Yonhap reported.

“We need corresponding emergency measures. We must cooperate with strategic partners to quickly identify alternative supply routes that do not transit the Strait of Hormuz,” Lee said.

Over the weekend, US President Donald Trump struck a tone of protest amid rising prices, saying gains in “short-term oil prices” were “the lowest price to pay” to destroy Iran’s nuclear threat.

“Only fools think differently!” Trump added.

During the briefing, South Korea’s president said the crisis in the Middle East has put a “significant burden” on his country’s economy, which is heavily dependent on trade and energy imports from the region.

He called on authorities to “react proactively” to increased volatility in financial and foreign exchange markets.

In the past week, the country’s benchmark Kospi It recorded its worst day on Wednesday with a 12% drop before rebounding 10% on Thursday and falling again on Friday and Monday.

In four sessions, multiple trading restrictions were implemented on futures and Kospi implemented circuit breakers twice.

South Korea’s won hit its weakest level against the dollar since 2009 on March 3, hitting an intraday high of 1,506.37, before strengthening to 1,457 the next day and weakening again from there.

Lee called on officials to “proactively expand” the 100 trillion won market stabilization program if necessary and “proactively prepare additional measures at the government and central bank level.”

The stabilization program ordered by Lee last week was launched on March 6 and is designed to calm capital markets.

However, the Korean Economic Daily reported that the South Korean president is not designed to artificially prop up stock prices, warning that officials should avoid buying stocks in a way that distorts the market.

The Japanese government has reportedly instructed it to prepare for the release of a national oil reserve storage facility raw Stocks according to Reuters on Sunday.

Reuters, citing a senior Japanese parliament member, said details such as the timing of the release were unclear.

Japan had emergency oil reserves equivalent to 254 days of domestic consumption in February, according to government figures.

On Friday, Vietnam announced that it will amend import taxes on imports of To ensure energy security of energy products, the Southeast Asian country will abolish import duties for fuel, Reuters reported.

Asian economies are particularly vulnerable to oil disruptions, according to a March 5 report by the Atlantic Council.

Although China is the world’s largest oil importer, it has more domestic oil production than countries such as Japan, South Korea and Taiwan.

“Its economy is as oil-intensive as Japan’s or Taiwan’s and less so than South Korea’s,” the Atlantic Council said: “Accordingly, the oil crisis will bring real pain… It could empower Beijing relative to its regional rivals.”

— CNBC’s Blair Bake contributed to this report.