Seoul: South Korea's consumer prices rose by 2.2 percent in March compared to the previous year, primarily driven by a significant increase in global oil prices amid ongoing tensions in the Middle East, as reported by government data released on Thursday. This inflation rate surpasses the government's target of 2 percent and marks the highest year-on-year increase since December, when it was recorded at 2.3 percent.

According to Yonhap News Agency, the Ministry of Data and Statistics attributed the latest rise to a substantial hike in petroleum product prices, which soared by 9.9 percent from a year earlier. This is the sharpest increase since October 2022, during the peak of the Russia-Ukraine conflict, when prices spiked by 10.3 percent year-on-year. Diesel and gasoline prices notably surged by 17 percent and 8 percent, respectively.

Lee Doo-won, a ministry official, explained that the larger increase in diesel prices is due to its broader use in transportation and goods, in contrast to gasoline, which is limited to passenger vehicles. The global oil price surge has been exacerbated by the closure of the Strait of Hormuz following U.S.-Israeli strikes on Iran in late February, severely impacting global oil supplies. South Korea's heavy reliance on energy imports has further amplified these effects.

While the prices of agricultural, livestock, and fishery products slightly decreased by 0.6 percent, this was largely due to a notable 5.6 percent drop in agricultural product prices. In contrast, livestock and fishery product prices rose by 6.2 percent and 4.4 percent, respectively. Service prices also saw a 2.4 percent increase, mainly driven by higher insurance costs.

Processed food prices experienced a slowdown in growth, rising by 1.6 percent in March compared to 2.1 percent in the previous month, marking the lowest growth rate since November 2024. Prices for sugar and flour fell by 3.1 percent and 2.3 percent, respectively, following cuts in factory prices.

Core inflation, excluding volatile food and energy prices, mirrored the overall consumer price increase at 2.2 percent year-on-year. The government noted that despite rising fuel prices, consumer price increases were partly mitigated by the implementation of a fuel price cap system. This system, adopted in March, sets maximum prices for fuel products supplied by refiners to gas stations and distributors bi-weekly, reflecting global oil price fluctuations.

First Vice Finance Minister Lee Hyoung-il emphasized the role of the price cap system and declining agricultural prices in limiting the consumer price rise to 2.2 percent. He made these remarks while leading the first meeting of a government task force dedicated to managing price pressures resulting from the Middle East conflict.

The vice finance minister highlighted the ongoing volatility in global oil prices and called for coordinated efforts across all agencies to monitor prices and ensure a stable supply of essential goods.