RECORD OIL PRICES CASTING CLOUDS OVER S. KOREAN ECONOMY.

SEOUL, May 3 Asia Pulse - An unstoppable rise in oil prices is dampening hopes that the South Korean economy, Asia's fourth-largest, will make a full-fledged recovery this year, analysts said Wednesday, predicting that energy prices will continue to rise.

The price of Dubai crude, which accounts for 80 per cent of South Korea's oil imports, rose to a new high of US$68.33 a barrel on Tuesday. Crude oil for June delivery rose 0.5 per cent to $74.61 a barrel in New York on concern that Iran's nuclear program may lead to a confrontation with the United States, disrupting exports from the world's fourth-biggest producer.

"Rising oil prices, along with a stronger won, is not a fresh issue for the South Korean economy," said Song Tae-jeong, an analyst at the LG Economic Research Institute.

"But energy prices are reaching a worrisome level, which will have a negative impact on business and consumer sentiment. Economic growth is feared to slow down in the second half."

South Korea's economy is expected to grow 5 per cent this year on the back of a recovery in private spending and resilient exports.

The nation's economy grew 6.2 per cent in the first quarter of the year from a year earlier, the highest growth rate since the fourth quarter of 2002, the Bank of Korea said in an advance estimate last week.

But such optimism is being overshadowed by runaway oil prices, which rose nearly 50 per cent this year. Some analysts say oil prices may soon reach $100 per barrel. South Korea is the world's fourth-largest oil importer.