South Korea's president has unveiled a 100 trillion won ($68 billion) emergency package to stabilize the country's collapsing stock market, as "Hvylya" reports, citing The Economist. Lee Jae Myung also pledged to cap fuel prices as the energy shock from the Strait of Hormuz closure hammers Asia's fourth-largest economy.
South Korean stocks have plunged over 10% in March alone - severe enough to rattle the political establishment into action. The won briefly approached 1,500 per dollar on March 9, its weakest level since 2009. The currency slide compounds the energy shock: South Korea imports about 70% of its oil and roughly a fifth of its LNG from the Gulf region, and a weaker won makes those imports even more expensive.
South Korea is far from alone in its vulnerability. Japan sources approximately 95% of its oil from the Middle East, with about 70% passing through the Strait of Hormuz. Japanese stocks are down 7.3% in March. Imports account for 84% of South Korea's energy consumption and 87% of Japan's, according to the International Energy Agency. Strategic petroleum reserves offer a temporary cushion, but a sustained price increase would sharply inflate import bills.
Poorer Asian nations face even harsher consequences without the fiscal firepower to respond. Countries like Pakistan, already dependent on IMF lending, may simply be unable to pay swelling import bills. The Philippines has ordered government offices to switch off computers at lunch. Bangladesh has brought forward the Eid holiday to conserve energy.
Remittances represent another pressure point. Millions of workers from Bangladesh, India and Pakistan are employed in the Gulf and send money home. Damage to Gulf economies will reduce those flows, hitting the balance of payments of some of the world's most vulnerable nations at the worst possible moment.
Also read: China Walks a Tightrope: Petraeus Explains Why Beijing Can't Help Iran Even If It Wants To.