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ECONOMY > Energy

Middle East tensions spark concern over oil supply in Japan

  • January 7, 2020
  • , Jiji Press , 2:29 a.m,.
  • English Press

Tokyo, Jan. 6 (Jiji Press)–Growing tensions in the Middle East following the killing of a key Iranian commander by the U.S. military have sparked concern in Japan as to whether the nation can continue securing stable crude oil supply.

An escalation of the U.S.-Iran tensions would lead to spikes in gasoline prices and electricity rates, dealing a blow to households and companies, analysts said.

“Overseas developments continue to require close monitoring,” Bank of Japan Governor Haruhiko Kuroda said at a meeting on Monday. “We will carefully examine geopolitical risks and other factors,” he added.

 A U.S. airstrike killed Gen. Qasem Soleimani, head of Iran’s Islamic Revolutionary Guard Corps’ Quds Force, last week. Following the rising tensions, key U.S. crude oil futures have climbed above 64 dollars per barrel for the first time since late April 2019.

“The economy will decelerate if oil prices go up,” Kansai Economic Federation Chairman Masayoshi Matsumoto, also chairman of Sumitomo Electric Industries Ltd. <5802>, told reporters on Monday.

“I had been aware of Middle East risks, but the situation like this is beyond my expectations,” an executive of a major Japanese life insurance company said.

Major Japanese oil distributors have been substantially curbing crude oil imports from Iran since the administration of U.S. President Donald Trump imposed sanctions on Tehran in 2018.

With Japan still relying on the Middle East for more than 80 pct of its crude oil imports, however, its economy would be hit hard if oil tankers’ safe navigation in the Strait of Hormuz, off Iran, is hampered, analysts said.

“We will diversify our crude oil procurement,” an official of JXTG Holdings Inc. <5020>, Japan’s leading oil wholesaler, said.

During the Persian Gulf Crisis, which started in August 1990 with Iraq’s invasion of Kuwait, crude oil prices shot up in a short period of time, and financial markets were also severely affected.

An official of a major Japanese electric power company which depends heavily on thermal power generation said: “If the ongoing tensions spread to countries around Iran, the impacts will be bigger. We will keep a close watch on the situation.”

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