Data released by the Bank of Korea on Wednesday indicates that import prices in South Korea fell at their fastest pace in three and a half years during June, a decline driven by a drop in oil prices following a temporary easing of tensions in the Middle East.

Preliminary figures from the central bank show the import price index fell 4.4% month-on-month in June, following a 0.2% increase in May. This represents the steepest monthly decline for the index since a 6.5% drop in December 2022.

Compared to the same period last year, the import price index for June was up 20.6%.

The month-on-month decline in June was primarily attributed to a 23% drop in the price of Dubai crude, South Korea's benchmark oil, which fell to $79.45 per barrel.

This data has a direct impact on South Korea, a nation highly dependent on imported energy.

In June, the import price of raw materials fell 10.3% from the previous month, while the price for intermediate goods declined by 3.2%.

The Bank of Korea noted that import prices are a core factor influencing inflation, as they transmit through the entire supply chain, ultimately affecting production costs and the prices of finished consumer goods.

Central bank data also showed that the export price index remained flat month-on-month in June; price increases for electronic products, amid a weakening Korean won, offset the impact of falling petroleum product prices. However, the index showed a significant year-on-year increase of 48.9%.