Bank of Korea Holds Rate at 2.5% Amid Middle East Risks

SEOUL, South Korea — The Bank of Korea held its benchmark interest rate steady at 2.5 percent on Friday, citing heightened uncertainty from escalating conflict in the Middle East that could fuel inflation through surging oil prices while threatening economic growth.

The central bank's seven-member monetary policy board voted unanimously to maintain the rate, aligning with expectations from all 31 economists surveyed by Reuters. In a statement, the Bank of Korea noted that the path ahead remains highly uncertain, influenced by the ongoing tensions involving Iran, fluctuations in the semiconductor industry, and other global factors. South Korea, the world's fourth-largest oil importer with about 70 percent of its supply from the Gulf region, faces particular vulnerability to energy price shocks. Crude oil benchmarks, such as Dubai, have more than doubled since March, driving up import costs and contributing to a recent weakening of the Korean won by 4 percent against the U.S. dollar.

Headline inflation reached 2.2 percent year-on-year in March, slightly above the bank's 2 percent target, and officials now anticipate it will significantly exceed their earlier forecast of 2.2...