Oil Shock from Middle East War Pushes Inflation Above 3%... May Consumer Prices Surge 3.1%, Highest in 26 Months (Update)

Petroleum Prices See Largest Surge in 46 Months

Cost-of-Living Index Jumps 3.3% Despite Stable Agricultural and Processed Food Prices

The ripple effects of the oil shock caused by the prolonged Middle East war have ultimately engulfed overall domestic prices. External inflationary pressure, which the government had previously managed to keep in check through policy interventions and increased agricultural supply, has reached its limit. As a result, the consumer price inflation rate broke through the 3% mark last month.

Yonhap News

According to the "Consumer Price Trends for May 2026" released by the Ministry of Data and Statistics on June 2, the consumer price index stood at 119.92 (2020=100) last month, up 3.1% from the same month a year earlier. This is the highest level in 26 months since March 2024 (3.1%). While the rate of increase remained in the 2.0% range as recently as January and February this year, it accelerated to 2.2% in March and 2.6% in April, marking a steep upward trend for three consecutive months.

The main driver behind the surge in prices was, without a doubt, petroleum products. Last month, among industrial goods, petroleum product prices soared by 24.2% year-on-year, becoming the primary contributor to the overall inflation rate. This marks the highest jump in 46 months (3 years and 10 months), since July 2022 (35.2%) when oil prices surged due to the Russia-Ukraine war. As a result of supply instability originating from the Middle East, fuel costs that directly impact daily life, such as diesel (33.3%) and gasoline (23.1%), skyrocketed across the board. The contribution of petroleum products to inflation reached a remarkable 0.92 percentage points, accounting for about 30% of the total 3.1% increase in prices in May by itself.

The energy shock was fully reflected in transportation prices, which surged by 11.6% year-on-year, demonstrating a chain reaction. The ripple effect of rising fuel costs extended to logistics and transportation expenses overall, with international airfare soaring by 33.5%.

Cost pressures from rising oil prices have spread further to personal services and consumer goods as a whole. Service prices rose by 2.8% year-on-year, and within this category, personal services excluding dining out increased by 3.7%, solidifying the downward rigidity of high inflation. In particular, ongoing instability in the Middle East has driven up air travel and tourism expenses, with overseas group travel costs soaring by 26.3%. Insurance service fees (13.4%) also posted a sharp increase. In conjunction with the seasonal effect of heightened outdoor activities, prices for recreation and culture jumped by 5.0%.

Agricultural, livestock, and fisheries products (2.2%) and processed foods (0.8%), which had recently served as a "shield" against inflation, performed relatively well by comparison. Agricultural product prices fell by 0.8% year-on-year, thanks to stable supplies of vegetables and fruits such as radish (-27.5%), pear (-17.8%), and cabbage (-43.9%). The processed food sector, which is currently under comprehensive government investigation for potential collusion among related companies, also saw its price increase limited to 0.8%, suggesting that policy intervention has had an effect.

However, the inflation felt by ordinary people is rising. The living price index, composed of frequently purchased items, rose by 3.3% year-on-year, significantly outpacing the overall index (3.1%). The sharp increase in non-food items (4.2%) due to soaring oil prices was the decisive factor.

Core inflation indicators, which show the underlying trend in prices—namely, the index excluding agricultural and petroleum products, and the OECD-standard index excluding food and energy—both increased by 2.5%, up by 0.3 percentage points from the previous month (2.2%). This is interpreted as a warning sign that the external oil price shock is now beginning to shake even the fundamental baseline prices.

This content was produced with the assistance of AI translation services.