Oil tops $90 again, squeezing small businesses on raw material costs

International oil prices crossed the $90-per-barrel threshold overnight as the US-Iran conflict intensified again. The more-than-six-month dispute has left raw material costs 30 to 50 percent higher for some small businesses, with certain firms paying triple the normal freight rates. Government filings related to the Middle East war have now surpassed 1,000 complaints and damage reports from small and medium-sized enterprises.

Brent crude settled at $95.63 per barrel on the London ICE Futures Exchange on Thursday, up 98 cents, or 1.0 percent, from the previous session. West Texas Intermediate also rose 79 cents, or 0.9 percent, to close at $91.01. Both benchmarks reached their highest levels since July 24. As recently as last Friday, Brent had closed at $89.31 per barrel — it had fallen more than 5 percent that week as talk of normalizing traffic through the Strait of Hormuz circulated, only to surge past $95 within three days as US-Iran military clashes flared up again.

The renewed escalation is weighing heavily on companies that source raw materials from overseas. According to the Ministry of SMEs and Startups, small and medium-sized enterprises filed a total of 1,071 complaints related to the Middle East war between Feb. 28 and noon on Friday — up 10 from the previous week.

Reports of actual damage or hardship reached 840, an increase of nine, while 161 filings expressed concern about potential harm. Counting multiple responses, rising logistics costs were cited in 338 cases, accounting for 40.2 percent of the companies that filed complaints. Shipping disruptions were reported in 303 cases (36.1 percent), and contract cancellations or suspensions in 255 cases (30.4 percent). There were also 131 reports of disrupted business travel and 100 of unpaid receivables.

Some companies are sitting on finished goods they cannot ship. One small manufacturer that received an order from Saudi Arabia has been holding off on dispatching products until maritime conditions stabilize. Because payment is triggered only after a vessel departs, the company has its capital tied up in inventory with no clear timeline for release.

Even before the latest oil price surge, raw material costs were already a top concern for small businesses. A Korea Federation of SMEs survey of 3,060 small and medium-sized enterprises conducted from Aug. 12 to Aug. 19 found that 41.0 percent cited rising raw material prices as their biggest operational challenge in August — the second most common response after sluggish sales at 52.4 percent. Intensifying competition among suppliers was cited by 31.4 percent, and rising labor costs by 27.8 percent.

The impact of higher crude prices extends well beyond companies that directly consume petroleum. When oil prices rise, the cost of petrochemical feedstocks such as naphtha and synthetic resins follows, and the resulting increase in freight and logistics expenses ripples across the broader manufacturing sector. Small manufacturers, which typically cannot pass cost increases on quickly through supplier pricing or consumer prices, are disproportionately likely to absorb the higher costs themselves.

A report published in July by the Korea Institute for Industrial Economics and Trade analyzed the energy price shock during the Strait of Hormuz blockade — from March 1 to June 8 — using input-output tables and related data. The report, titled "Hormuz Risk After the US-Iran End of War and Its Impact and Response Directions for Korean Industry," found that the rise in energy prices pushed up production costs across all domestic industries by 3.73 percent, with the manufacturing sector seeing a 4.70 percent increase.