27 August 2026
Executive Summary
Japan has moved beyond emergency rerouting and begun planning structural alternatives to the Strait of Hormuz.
The Japanese government announced yesterday that it will support Middle Eastern pipeline projects capable of bypassing the Strait, diversify crude-oil procurement and establish additional mechanisms to protect shipping and energy supplies.
The vulnerability is stark.
In 2025, approximately 94% of Japan’s crude oil came from the Middle East and 93% of its total crude imports passed through Hormuz.
Japan’s Prime Minister’s Office separately confirms that the government has already been securing alternative crude and petroleum products that do not rely upon Hormuz and addressing supply bottlenecks created by the Middle East crisis.
The risk lesson is significant:
Real diversification sometimes requires building different infrastructure, not simply signing contracts with different suppliers.
UK Impact
UK companies frequently describe themselves as diversified because they buy from several suppliers.
That can be misleading if all suppliers depend upon:
- The same port.
- The same canal.
- The same pipeline.
- The same electricity grid.
- The same shipping corridor.
Japan’s response recognises this problem explicitly.
Its plan includes support for pipelines bypassing Hormuz, a scheme to share the higher transport cost of alternative crude supplies, and a potential reinsurance mechanism if overseas reinsurance becomes unavailable.
That is important because resilience often costs more before disruption occurs.
Global Impact
Japan spends more than 20 trillion yen annually on fossil-fuel imports, making energy-route resilience a major economic-security issue.
Its proposed response includes:
- Alternative crude origins.
- Pipeline bypass capacity.
- Shipping reinsurance.
- Strategic naphtha reserves.
- Greater domestic energy production.
The breadth of the plan is instructive.
A single chokepoint cannot always be mitigated by one alternative vessel route.
Sometimes the correct response requires changes to:
infrastructure + insurance + inventory + sourcing + domestic production.
Our View
Businesses exposed to major transport chokepoints should distinguish between supplier diversification and route diversification.
Companies should ask:
- Do alternative suppliers use the same shipping corridor?
- Can product physically leave the producing region another way?
- Does alternative infrastructure already exist?
- Who owns it?
- How much spare capacity does it have?
- What additional freight cost would bypassing the chokepoint create?
- Are those costs included in continuity budgets?
- Would marine insurers support the alternative route?
- Is strategic inventory held beyond the chokepoint?
- Could regional processing reduce transport dependency?
- Are long-term infrastructure investments justified by the exposure?
The deeper lesson from Japan is that resilience cannot always be improvised once the crisis begins.
Sometimes the safest alternative route is the one that must be financed and built years before anyone needs it.
Risk Indicator: HIGH – ENERGY & LOGISTICS
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The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.
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