Japan's three leading shipping companies—Nippon Yusen (NYK), Mitsui OSK Lines (MOL), and Kawasaki Kisen (K-Line)—reported substantial profit declines for fiscal year 2025. This downturn reflects the normalization of freight rates after the pandemic-era boom. Executives are particularly concerned about the fiscal year 2026 outlook, citing the risks associated with the Strait of Hormuz blockade and its potential impact on fuel costs and shipping route disruptions. Japan's economy is highly vulnerable, with 99.5% of its total trade relying on sea transport.
The ongoing US-Israel conflict with Iran has led to a dramatic 95% reduction in traffic through the Strait of Hormuz, a critical chokepoint for global energy trade. Before the conflict, approximately 100 vessels, mostly tankers, passed through daily. This number plummeted to an average of five vessels per day after the IRGC announced the strait's closure in March 2026. This disruption has significantly impacted the flow of crude oil, LPG, and LNG, which previously accounted for 38%, 29%, and 19% of global seaborne totals, respectively. The closure has caused crude exports from the Gulf region to drop by nearly half, from about 17 million barrels per day in 2025 to roughly 9 million barrels per day as of August 2026.
The closure of Hormuz means that tankers must reroute around the Cape of Good Hope, adding 10-15 days of transit time and substantially increasing fuel costs. This situation initially hurts the margins of shipping companies like NYK, MOL, and K-Line through fuel surcharges, though premium freight rates for supply security might eventually materialize. Countries heavily dependent on Middle Eastern oil, such as Japan (77% reliance), Pakistan (78%), Eritrea (90%), and Madagascar (90%), are facing higher prices, longer shipment waits, and the need to find alternative suppliers. Oil prices have risen by about 20% since before the war, with some analysts describing this increase as "muted" due to pre-war inventory levels.
Despite the significant disruption, some adaptations are emerging. The Iranian channel through the Strait of Hormuz has become the dominant identifiable route, with 40% of crossings using Iran's unilateral scheme. Additionally, a growing number of vessels are "going dark" or engaging in "shuttling" operations, where GCC-linked tankers undertake the risk of transiting Hormuz, often through ship-to-ship transfers. UAE's Adnoc, Kuwait Petroleum Corporation, and QatarEnergy have pioneered these shuttle operations, helping to raise total oil flows through Hormuz to as much as 8 million barrels per day from about 4 million barrels per day in mid-July. Russia's fuel oil shipments to Singapore and Malaysia have also increased significantly, highlighting new hubs for redirected energy flows.
The situation remains volatile, with the US-Iran conflict settling into a stalemate that could extend into 2027. The financial performance of Japanese shipping firms and the broader energy market will continue to be heavily influenced by developments in the Strait of Hormuz. A comprehensive agreement between the US and Iran could alleviate tensions and act as a positive catalyst for shipping stocks, while a breakdown would trigger immediate tanker rate spikes and necessitate emergency energy security planning across Japan's major trading houses.
