Japanese LNG imports tighten as Australian supply slips and Hormuz closes Gulf cargoes

Japanese LNG imports tighten as Australian supply slips and Hormuz closes Gulf cargoes Japan meets almost all its gas demand with imported LNG, leaving it doubly exposed as Australian shipments fall and the Strait of Hormuz stays shut. Australian LNG exports fell again in 2025, with year-to-date shipments down 2.8% against the same period a year earlier, according to LSEG seaborne data, leaving the country further behind the US and Qatar.⁴ For Japan, the largest buyer of Australian gas, the timing is awkward.⁴ It matters because Japan has almost no fallback. The country imported 66.3 Mt of LNG in 2025, down 1.5% year-on-year, and meets around 98% of domestic gas demand through those imports.² Roughly 6% of that supply normally transits the Strait of Hormuz from Qatar and the UAE, while the bulk comes from Australia at 26 Mt, Malaysia at 10 Mt and Russia at 5.8 Mt.² With the strait effectively closed by the war in Iran, the Hormuz cargoes are gone, and the pressure now falls on the rest.² The export slide bites harder because spot prices are already high. Asian LNG surged above $25/MMBtu earlier in the crisis after damage to Qatar's export infrastructure and the Hormuz blockade cut supply forecasts, DBT reported.⁶ The JKM front-month traded at $19.93 [live_prices], above the $17.02 Asian benchmark that LNG index data recorded on 19 May (2026-05-19).⁷ Japan's power system amplifies the exposure. Natural gas provides around 32% of power generation, ahead of coal at 28%, nuclear at 9% and oil at 7%, and the power sector absorbs 55-65% of total gas consumption.² Unlike Europe, where coal-to-gas switching can flex power-sector gas demand, Japan has little room to substitute at short notice.² On oil, Tokyo is better cushioned. With about 90% of its crude sourced from the Middle East, Japan has already tapped around 80 million barrels of strategic petroleum reserves, equivalent to roughly 26 days of domestic demand, and covers nearly 100% of gasoline and 95% of diesel needs through domestic refining.² Gas has no equivalent stockpile to draw on.² The structural weakness is that LNG cannot reroute the way crude can. A gas analyst told Montel on 21 May (2026-05-21) that the Hormuz closure exposes LNG's lack of a pipeline fallback, since a switch to pipeline flows is not an option as it is for oil.¹ Crude can find another route; a gas cargo either sails or loses its buyer.¹ Australia is not insulated either. More than 50% of its refined fuel products depend on oil moving through Hormuz, and its two aging refineries supply only 20% of national fuel demand, according to ZeroHedge.³ A June report in the Townsville Bulletin warned that 250,000 Australian jobs rely on gas supply now flagged as at risk.⁸ Governments are moving, but slowly. Australia and Japan signed an energy cooperation pact on 19 May (2026-05-19) that also covers critical minerals, with Australia the top LNG supplier to resource-poor Japan, Reuters noted.⁵ Agreements do not add liquefaction capacity or speed a cargo to port.⁵ European buyers are watching the same squeeze. ICE Endex TTF front-month traded at €55.30, up 1.70% [live_prices], after Asian and European benchmarks jumped together during the initial disruption.⁷ Whether Australia's export decline proves a temporary dip or a lasting trend is the risk now weighing on Pacific buyers.⁴ With no strategic reserve for LNG and Hormuz shut, JKM is the gauge to watch, and it is climbing.¹