Oil and Chips in Korea Trade—Macro and Policy Implications

Goldman Sachs analyzes the interplay between Middle East geopolitical tensions, rising oil prices, and South Korea's surging semiconductor exports. Despite potential oil price shocks, the semiconductor export boom, driven by price effects and growing 47% seasonally adjusted through February, is expected to significantly improve Korea's current account. Under a base case forecast of Brent crude at $64 per barrel in 2026, the current account surplus is projected to reach $255 billion, roughly 9.3% of gross domestic product. This represents a substantial upgrade from prior estimates. Even if oil prices average $100 per barrel annually, the surplus remains robust due to semiconductor strength overwhelming energy import costs. Because capacity constraints limit volume growth until 2027, the primary economic spillover channel is the wealth effect. Assuming a KOSPI target of 6,400 and a conservative marginal propensity to consume of 0.01, equity gains could lift private consumption and boost real gross domestic product growth by approximately 0.2 percentage points. Policywise, stronger export revenues create fiscal space for targeted support later this year without requiring additional debt issuance. Meanwhile, the central bank is expected to maintain interest rates throughout the year, as a negative output gap likely persists until mid-2027.