South Korea’s 10-year government bond yield climbed to 3.87%, its highest level since November 2023, as inflation risks intensified amid surging oil prices in a country heavily dependent on energy imports. The move came after Iran warned it would strike the energy infrastructure of its Gulf neighbors if President Trump followed through on his 48-hour ultimatum to attack Iran’s electricity grid, dampening hopes for a swift resolution to the war now entering its fourth week.
The threat injected fresh volatility into oil markets, heightening inflation concerns and increasing the probability of preemptive interest rate hikes. At the same time, South Korean economist Shin Hyun-song—renowned for having anticipated previous financial crises—was appointed over the weekend as the new head of the country’s central bank. Economists widely expect Shin to adopt a more hawkish stance at the Bank of Korea, emphasizing macroprudential policies and showing greater restraint on interest rate cuts in light of persistent financial vulnerabilities.
