The war between the United States and Iran has finally found its way to an exit. The two countries effectively made official on Monday their agreement to conclude a ceasefire memorandum of understanding. Donald Trump said in a social media post Sunday, local time, that "the deal with Iran is now finalized." Iranian Deputy Foreign Minister Kazem Gharibabadi confirmed the development in a television interview, saying "a permanent and immediate end to hostilities has been declared on all fronts, including Lebanon." Pakistan, which mediated the negotiations, also confirmed the agreement. A signing ceremony is scheduled for June 19 in Switzerland. Trump said the Strait of Hormuz "will be opened as soon as the deal is signed on Friday."
The news is welcome — and a timely relief for the South Korean economy. The reopening of the Strait of Hormuz should stabilize international energy and raw materials markets. For an economy heavily dependent on crude oil imports, that translates into lower inflation and reduced costs for businesses. A weaker won and a recovery in global investor sentiment would also provide tailwinds for domestic capital markets. While the full terms of the ceasefire MOU have yet to be disclosed, the agreement is expected to include Iran's permanent renunciation of nuclear weapons and its consent to dismantle its nuclear program and dispose of nuclear materials, with the United States providing compensation — including the release of frozen overseas assets and sanctions relief — in line with Iran's compliance. As sanctions are lifted, South Korean companies could gain opportunities to participate in postwar reconstruction projects in Iran.
Yet there is no room for complacency. Proactive preparation is essential. Authorities should closely monitor the progress of the ceasefire and oil price movements, and work to transition energy policy — including price caps — smoothly from emergency footing to a peacetime framework. Defense strategies are also needed against risks such as financial market volatility triggered by a sharp drop in oil prices or a prolonged low-price environment, as well as the impact on the refining and petrochemical industries. Over the medium to long term, South Korea should pursue a strategic realignment to reduce and diversify its dependence on the Middle East for crude oil supply and trade routes. Diplomacy and financial support plans for participation in reconstruction projects in Iran and Lebanon must also be set in motion.
Volatility in US strategy toward North Korea and its nuclear policy remains the foremost security concern for South Korea. The day before Trump announced the ceasefire agreement, he posted on social media a photo of himself with North Korean leader Kim Jong-un — an image from their Singapore summit on June 12, 2018. While the post may simply mark the eighth anniversary of that meeting and highlight Trump's record, it could also signal his intention to address the North Korean nuclear issue in earnest following the Iran ceasefire, or to re-engage with Pyongyang. Whether Washington will seek to apply an Iran-style denuclearization model to North Korea is a matter of the gravest consequence. The South Korean government must reaffirm the bedrock of the alliance with the United States, strengthen communication and consultation with Washington, and develop proactive scenarios for North Korea's denuclearization going forward. From the full conclusion of the US-Iran war to the period that follows, not a moment of complacency can be afforded.
