The "Time Bomb" of the Strait of Hormuz: How the Israel-Iran Crisis is Shaking the Global and Japanese Economy

1. Prologue―Why the "Point in the Sea" Shakes the World

In June 2025, an attack by the Israeli military on an Iranian gas processing facility and Iran's subsequent declaration of retaliation rapidly escalated tensions in the Middle East. The mere mention that the "artery" of global energy and trade, the Strait of Hormuz, might be "blocked" sent international crude oil futures soaring by 13%, and investor sentiment shifted dramatically to "risk-off." The Strait of Hormuz is only 29 nautical miles wide. If tankers passing through this strait were halted, it would affect everything from everyday gasoline to imported food on our tables, and even Japan's LNG for power generation.euronews.com

2. What is the Strait of Hormuz?

• An absolute chokepoint through which about 30% of the world's seaborne crude oil and about 20% of LNG pass

• Alternative routes such as the Saudi East-West Pipeline can handle only a total of 4.2 million B/D, which is just over a quarter of normal bypass capacityeuronews.com
  
  

3. Current State of the Israel-Iran Conflict

• June 14: Israel attacks a fuel storage facility in northwestern Iran

• June 15: An Iranian Revolutionary Guard-affiliated lawmaker states "seriously considering a blockade of the strait"bloomberg.co.jpjp.reuters.com
  
  

4. Market Impact - Crude Oil, Stocks, and Forex

• Brent temporarily calms from $78→$73, but JP Morgan's worst-case scenario exceeds $130

• VIX reaches a three-week high, yen surges to the 152 yen level (yen buying as a risk aversion)theguardian.combloomberg.co.jp
  
  

5. Direct Impact on the Japanese Economy

• Dependence on Middle Eastern crude oil and LNG: Crude oil 93.7%, LNG 20%

• Households: Prices of electricity, gasoline, and plastics soar in succession

• Companies: Raw materials for chemicals, automobiles, and foodCost Increases Offset by Wage Pressurejetro.go.jp
  
  

6. Central Banks Caught in the Middle—BOJ, FRB, BOE

• Inflation Resurgence vs. Economic Slowdown = "Stagflation Trilemma"

• If the BOJ raises rates, mortgage rates will soar; if not, yen depreciation and import inflation will worsenft.comtheguardian.com
  
  

7. Sentiment on Social Media

8. Impact Simulation by Scenario

• Limited Conflict (60% probability): Crude oil $80, yen exchange rate 150 yen, Bank of Japan maintains status quo

• Temporary Blockade (30% probability): Crude oil $100-110, yen 138 yen, Bank of Japan holds emergency meeting to reduce bond purchases

• Long-term Blockade (10% probability): Crude oil $120-130, yen surges→125 yen, global simultaneous economic recession

9. Measures Japan Should Take

1. Consider coordinated release of national petroleum reserves

2. Negotiate additional LNG procurement with the US and Australia

3. Household support: Temporary measures for gasoline and electricity subsidies

4. Implement energy-saving investment tax cuts ahead of schedule

10. Long-term Perspective―Accelerator towards "Post-Fossil"

• Crisis as a catalyst to accelerate renewable energy investment and supply chain diversification

• A unique opportunity for Japan to boost GX (Green Transformation) investment

Epilogue―Can the Fuse of the Time Bomb be Removed?

The Strait of Hormuz is literally the "jugular vein" of the global economy. While the worst-case scenario of a blockade is still considered "low probability," the market will continue its countdown unless the fuse is removed. What Japan can do is to mitigate short-term shocks while not postponing the decision to change its energy structure in the long term.euronews.com