Hormuz Blockade Sends Japan's Wholesale Power Prices Skyrocketing

A prolonged blockade of the Strait of Hormuz is causing significant disruptions to liquefied natural gas (LNG) supplies, leading to a surge in wholesale power prices in Japan. According to a report by the International Energy Agency (IEA), the average wholesale spot electricity price for the April-June 2026 quarter has risen approximately 30% year-on-year, reaching $90 per megawatt-hour. This is primarily due to the stagnation of Middle Eastern LNG supplies, exacerbated by a surge in electricity demand driven by extreme heat.

The IEA report highlights Japan's vulnerability to price volatility and supply disruption risks in the international LNG market, given that LNG-fired thermal power accounts for roughly 30% of the country's energy mix. The Strait of Hormuz blockade has already led to physical impediments to tanker operations, as well as intensifying price competition for alternative procurement sources.

The surge in wholesale power prices is expected to impact procurement costs for domestic electricity retailers, with prices potentially breaching $100 during peak summer periods. The IEA warns that if the increase in cooling demand due to extreme heat coincides with a prolonged blockade, prices could continue to rise.