South Korea’s finance minister said Friday that the government would continue to monitor the situation in the Middle East and would respond firmly to any threats, while reassuring them that the tensions would have a limited impact on the economy.

“We will closely monitor the volatile situation in the Middle East along with the market trend and respond firmly if necessary, as related uncertainties continue to exist,” Deputy Prime Minister and Finance Minister Hong Nam-ki said in a policy meeting with other ministers. 

“But both the local and overseas financial markets have stabilized (on the back of eased tensions) and we have yet to spot any special signs or direct impacts on the real economy,” he added.

Hong’s remarks came in the wake of eased tensions in the Middle East, after Iran attacked US-led forces in Iraq on Wednesday in retaliation for a US drone strike that recently killed an Iranian military commander. It rattled the global market throughout the day and fueled fears of a war in the region before the tensions dialed down.

The local stock market rallied as tensions began to ease between the US and Iran, and domestic oil prices and the foreign exchange currency market have stabilized, Hong noted.

Korean expats and workers in Iran are currently safe as well, the deputy prime minister added.

But as tensions linger, Hong said the government is monitoring conditions around the clock and is prepared to take swift action and put a contingency plan in place if the situation calls for it.

“Though it is crucial to hold a serious view on the situation, there is the need to be cautious against excessive fear,” Hong said.

The Bank of Korea said earlier that risks associated with lingering tensions in the Middle East were likely to continue affecting the markets, but also expressed the belief that there was no danger of a full-blown war.

By Jung Min-kyung (mkjung@heraldcorp.com)