Japan and Korea Can Ride Out a Hormuz Closure on Reserves for Months. Their Exposure Is Price, Not Barrels

Since early March 2026, when Iran closed the Strait of Hormuz following the US and Israeli air strikes that began on 28 February, Japan and South Korea have faced the sharpest energy shock of any major industrial economies. Japan imports about 95 per cent of its crude oil from the Gulf and South Korea about 70 per cent, according to figures reported by The Straits Times. Oil prices rose from around USD 70 to 72 a barrel before the conflict to a peak of USD 119 on 9 March, before settling near USD 100.

Stock markets in both countries fell by more than 5 per cent on 9 March. On 11 March, as part of an International Energy Agency collective action to release 400 million barrels, South Korea announced a release of 22.46 million barrels, up to nine days of domestic demand, and Japan announced a release of 80 million barrels, about 15 days of consumption. Our view is that both countries are physically well prepared for a closure lasting months, thanks to some of the largest strategic reserves in the world.

Japan holds oil reserves equivalent to around 254 days of consumption and South Korea around 207 days, combining government stocks, mandatory industry stocks and, in Japan's case, jointly held stocks with producer countries. The releases announced so far are a small fraction of total stocks. South Korea's price caps and Japan's subsidies protect consumers in the short term. A better approach targets support to vulnerable households and to firms facing severe hardship, while allowing prices to rise enough to encourage conservation.

The crisis reinforces a lesson that both countries have been slowly learning: the most durable protection against Gulf supply shocks is lower dependence on imported fossil fuels. Japan and South Korea are among the best-prepared countries in the world for a Hormuz closure in terms of physical supply, with reserves that can last many months.