The Japanese stock market experienced a sharp decline on Monday, March 9, 2026, as escalating military tensions in the Middle East triggered a significant selloff. Futures for Japan’s Nikkei index fell by as much as 7% during early trading, reflecting heightened concerns about energy supply disruptions and a potential resurgence of inflation.
Oil Prices Surge Amid Escalating Conflict
The conflict between Iran and Israel, which has involved military strikes on oil refineries, has drastically impacted global oil markets. U.S. crude oil futures surged by more than 22% in early trading, reaching $111.24 per barrel—the highest level since July 2022. Similarly, Brent crude oil futures rose by 19% to $111.04 per barrel. The disruption in oil supplies, particularly through the critical Strait of Hormuz, has amplified fears of prolonged supply shortages and increased geopolitical risks.
Impact on Japan’s Energy Security
Japan’s heavy reliance on Middle Eastern energy imports has made its economy particularly vulnerable to disruptions in the region. The country imports approximately 95% of its crude oil and 11% of its liquefied natural gas (LNG) from the Middle East. Notably, 70% of Japan’s oil imports and 6% of its LNG pass through the Strait of Hormuz, a vital chokepoint for global energy shipments.
In January 2026, Japan imported around 2.8 million barrels of oil per day, with over half of these imports coming from Saudi Arabia (1.6 million barrels per day). Other suppliers include the UAE, Kuwait, and Qatar. Given this dependency, any instability in the Middle East directly threatens Japan’s energy security.
Strategic Reserves Provide Temporary Cushion
To mitigate the risks of supply disruptions, Japan has built one of the world’s largest strategic petroleum reserves. These reserves can cover 254 days of consumption, with 146 days stored in government facilities, 101 days held by private companies, and an additional seven days in shared reserves with oil-producing nations. One notable arrangement is Japan’s storage agreement with Saudi Aramco in Okinawa, which allows Tokyo priority access to 8.2 million barrels in times of crisis.
Despite these measures, the Japanese government has stated it does not plan to tap into its reserves yet. The last time Japan used its emergency reserves was in 2022, in coordination with the International Energy Agency (IEA), during the Ukraine conflict.
Gas Market Faces Lower Risks
While the oil market faces significant challenges, Japan’s LNG imports are less exposed to Middle Eastern instability. Around 40% of Japan’s LNG is sourced from Australia, reducing its reliance on Gulf supplies. Moreover, Japanese utility companies have recently increased their LNG stockpiles by 10%, reaching 2.19 million tons—enough to cover approximately 12 days of consumption. The country’s total gas reserves exceed 4 million tons, providing an additional buffer.
According to market analytics firm Kpler, Japan’s current LNG reserves could sustain consumption for 44 weeks if only imports through the Strait of Hormuz are disrupted. However, in the worst-case scenario of a complete halt in LNG imports, the reserves would last only three weeks. As a contingency, Japan is exploring emergency agreements with Qatar and potential supply swaps with Italy and South Korea.
Inflation Concerns Mount
The spike in energy prices poses a significant challenge to Japanese Prime Minister Sanae Takaichi’s efforts to curb inflation. In November 2025, the government introduced a fiscal stimulus package worth 21.3 trillion yen ($135 billion) to ease the burden of rising living costs. The measures included subsidies for fuel, electricity, and gas prices, as well as direct cash transfers to households. However, the latest surge in oil prices threatens to undermine these policies, putting additional strain on households and businesses.
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