The US-Iran conflict has heightened concerns over energy security for import-dependent Asian nations, causing disruptions to regional production and transportation. This has led to a spike in Asian liquefied natural gas (LNG) spot prices, with the Platts Japan Korea Marker (JKM) reaching a one-year high. Analysts note that each week of disruption could halt about 1.5 million tonnes of LNG shipments to Asia.

Japan's Energy Supply and Response

Japan, a top LNG importer, is evaluating the situation. The Minister of Economy, Trade & Industry stated the government is considering measures such as releasing crude oil reserves and securing alternative LNG supplies. While Japanese shipping companies have halted operations in the Strait of Hormuz, the trade minister indicated the nation's energy supply is not immediately affected by Qatar's production halt. Japan has alternatives, including tapping the spot market or arranging cross-purchases among utilities.

Market Volatility and Industry Assessments

Experts suggest the extent of market disruption depends on the duration of the transit halt. While volatility is currently below 2022 levels, prolonged disruptions could lead to higher prices. Major Japanese gas companies like Osaka Gas and Tokyo Gas report a low immediate risk of supply disruption due to their contract portfolios but are closely monitoring price trends, which are expected to become unstable. Trading houses with interests in Iran declined to comment.

Japan's Diversified Supply Portfolio

Japan's LNG import strategy mitigates the impact of Middle East disruptions. Direct imports from Qatar now constitute only 6% of total supply, down from previous years, while Middle East imports overall account for 11%. Australia is Japan's largest LNG source, providing over 40% of imports. This diversification, along with potential alternative power generation from coal, lessens the impact of a Strait of Hormuz closure compared to the oil market. Japan also has significant emergency capabilities, including 254 days' worth of oil reserves and agreements for LNG cargo swaps with other countries.