Japan is facing a surge in oil prices following a U.S. and Israel attack on Iran [1].
The current crisis threatens to destabilize the Japanese economy by triggering inflation and increasing the cost of living for consumers. Because Japan relies heavily on imported energy, geopolitical volatility in the Middle East directly impacts domestic price stability.
This situation, referred to as the "Reiwa oil crisis," occurs three months after the military actions against Iran [2]. The impact is already visible at the pump, where gasoline prices have reached 190 yen per litre [3].
Analysts are revisiting the lessons of the 1973 Arab oil embargo and the 1979-80 oil crisis caused by the Iranian Revolution [1]. Those two historic shocks fundamentally reshaped the Japanese economy, forcing the nation to move away from oil-dependent growth and toward energy efficiency [1].
There is some disagreement regarding the primary drivers of current inflation. Some reports said that domestic factors, such as wages and prices, have been the main drivers since 2023 [2]. Other reports said the current price surge is driven primarily by foreign oil-supply disruptions [2].
Regardless of the primary cause, the memory of the 1970s remains a cautionary tale for policymakers. During those previous shocks, Japan suffered severe economic contraction and social unrest before successfully pivoting its industrial strategy [1].
“Japan is facing a surge in oil prices following a US and Israel attack on Iran”
The recurrence of an oil-driven economic shock in 2026 tests Japan's resilience and its transition to a more diversified energy portfolio. While the country learned to optimize energy use after the 1970s, the current volatility demonstrates that Japan remains vulnerable to Middle Eastern geopolitical instability, which can override domestic economic gains in wages and pricing.
