Amid the shadow of Iran war, South Korea's March exports surged by 48%, with semiconductors becoming the core driver.

Under the shadow of the geopolitical and energy crisis triggered by the Iran war, South Korea’s exports in March still showed resilience, with the monthly export value for the first time exceeding $80 billion. Among them, semiconductor exports first broke the $30 billion mark, and AI demand has become the absolute driving force.

Preliminary data released by South Korea’s Ministry of Trade, Industry and Resources on Wednesday showed that in March, the export value surged 48.3% year over year to a record high of $86.13 billion, far above the expected median of 42.9% from market surveys. Import value rose 13.2% year over year to $60.4 billion, resulting in a record trade surplus of $25.74 billion.

This data sends a clear signal to the market: although conflicts in the Middle East have led to soaring energy prices and disrupted logistics, the upturn in the global technology cycle—especially the breakout of investment in AI infrastructure—is becoming a decisive force supporting key links in South Korea’s, and even the global, supply chain.

Semiconductor exports first exceed $30 billion, and AI demand becomes the absolute main driver

Semiconductors are undoubtedly the core engine behind South Korea’s export surge in March. The data show that in March, semiconductor export value jumped 151.4% year over year to $32.83 billion—not only accounting for nearly one quarter of South Korea’s total exports, but also the first time in history that it has surpassed the $30 billion mark.

Behind this historic breakthrough is the sustained frenzy worldwide for investment in AI and data centers. As the home of global memory chip giants such as Samsung Electronics and SK hynix, South Korea is fully benefiting from this AI dividend. Higher chip prices, together with one additional working day compared with the same period last year, are jointly driving this strong growth.

Jeeho Yoon, an economist at Bank of France Paris, said, “Memory chip prices have recently eased, but they are still higher than the level in the same period last year, supporting ongoing strong export growth. It will be crucial to closely watch whether price momentum faces the risk of a sharp decline, and whether unit sales can maintain steady growth.”

Geopolitical conflict spills over into the energy supply chain, and petrochemical exports face pressure

Although the overall export figures are impressive, the negative spillover effects of the Iran war on the South Korean economy have begun to show. As an energy-importing country that is highly dependent on Middle East oil and gas resources, South Korea is facing higher import costs and inflation risks driven by rising crude oil prices.

Affected by the global oil price increase caused by the Middle East conflict, in March, South Korea’s exports of petroleum products surged 54.9% year over year to $5.1 billion. However, to cope with tight domestic supply, the South Korean government imposed export restrictions in March on fuels such as gasoline and diesel. As a result, the export volumes of gasoline and diesel fell by 5% and 11% year over year, respectively.

More seriously, as naphtha, a key raw material for the petrochemical industry, saw its export volume plunge 22% in March. South Korea imposed temporary export restrictions on naphtha last week, because supply tightness was caused by transport disruptions through the Strait of Hormuz since late February.

Jeeho Yoon warned, “Government export restrictions on naphtha and potential export restrictions on petrochemical products may have a downward impact on exports. People worry that some of these effects will be reflected in April’s export data, but we believe that, driven by semiconductors, overall export growth is likely to continue.”

Strong U.S. market demand, Middle East exports collapse

Looking at export destinations, South Korea has shown strong momentum in exports to both of the world’s two largest economies. In March, South Korea’s exports to the United States also rose sharply by 47.1% to $16.34 billion, mainly driven by strong demand for chips and computers.

However, due to the continuing conflict, South Korea’s exports to the Middle East region fell sharply by 49.1% year over year to only $900 million, highlighting the direct hit that geopolitical risk has dealt to regional trade.

Policy responses and the central bank’s dilemma

To alleviate the secondary economic effects of the Middle East crisis, the Lee Jae-myung administration in South Korea has proposed compiling a supplementary budget of about $17 billion (KRW 26.2 trillion) to support consumers and businesses, including measures to ease high fuel costs.

For the South Korean central bank, strong exports and rising inflation risks create a complex policy environment. A member of the Bank of Korea’s board of directors, Lee Soohyung, warned that higher energy costs may push up inflation, while uneven growth and tightening financing conditions will put pressure on vulnerable industries, increasing the possibility of credit pressure.

The market is closely watching the interest rate decision scheduled for April 10. This will be the final interest rate decision chaired by the current governor, Rhee Chang Yong; it will then be succeeded by the nominated Hyun Song Shin. Investors will look for clues as to whether inflation risks will prompt the Bank of Korea to shift toward a more hawkish policy.

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