South Korea inflation hits 30-month high in June amid Middle East tensions

South Korea’s consumer inflation rose to its highest level in 30 months in June, as the impact of the Middle East war continued to feed through oil prices and supply chains, official data showed Thursday.

Consumer prices increased 3.2% last month from a year earlier, marking the fastest annual rise since December 2023 and the second consecutive month above 3%, according to the Ministry of Data and Statistics.

The latest reading reflected strong upward pressure from energy-related items, with industrial product prices climbing 4.4% year-on-year.

Fuel prices surged 24.7% in June, contributing 0.93 percentage points to overall inflation. It was the fastest rise in fuel prices since July 2022, when they jumped 35.2%.

Gasoline prices rose 23.1%, while diesel prices soared 33.7%, underlining the pressure on South Korea, which relies heavily on energy imports.

Agricultural and fishery product prices also increased 3.2% from a year earlier. Domestic beef prices rose 7.5%, rice prices climbed 11.7%, and green onion prices surged 37.1%, partly due to reduced cultivation areas and heat wave-related supply disruptions.

Service prices advanced 2.6% year-on-year, with public-sector services up 1.6% and private-sector services rising 3.4%. Excluding dining-out services, private service prices increased 3.9%.

International flight ticket prices jumped 28.2% in June, adding to household cost pressures.

Core inflation, which excludes volatile food and energy prices, rose 2.5% from a year earlier.

The Ministry of Finance and Economy said the government’s fuel price cap system, introduced in March, helped contain headline inflation at 3.2%. Without the measure, consumer price growth would have reached 3.6%, according to the ministry.

The Bank of Korea said inflation is expected to ease in July from the June level, but remain elevated for the time being as lower crude oil prices are partly offset by demand-side pressures from economic growth.

Officials also warned that recent foreign exchange volatility has not yet fully affected consumer prices, with possible effects expected to emerge in the second half of the year.