Intensifying military tension between the United States and Israel and Iran reignited concerns over the closure of the Strait of Hormuz and is generating a powerful impact on energy markets around the world. Each time geopolitical risks emerge in the Middle East, the anxiety over the possibility of a third oil shock is voiced in Japan, whose energy self-sufficiency rate is low.
However, it is risky to interpret the current situation within conventional frameworks. This is because both on the battlefield and in financial markets, Artificial Intelligence (AI) is driving developments at an unprecedented level. When combining objective data and the latest trends of AI, the true threats we are now facing appear to be significantly different from those being discussed among the general public.
Overwhelming military AI technology of the United States and a strong message to China
What is notable in the current military action against Iran is the demonstration of the overwhelming superiority of the latest military technology of the United States, especially that of autonomous weapons utilizing AI. Synthesizing strikes by swarms of suicide drones that were made highly autonomous by AI (loitering munitions) and unmanned vessels and airplanes have reached a level of capability that easily nullified conventional air defense networks.
This reality extends beyond controlling the situation in the Middle East. The United States is demonstrating, through its latest responses against Iran, the threat that the U.S. military's AI weapon networks present as a powerful deterrent to China, which is aiming to expand its hegemony in the South China Sea with a possible contingency involving Taiwan in mind. The nature of war has been irreversibly changed by the emergence of AI.
AI instantly prices in geopolitical risks in international markets
AI that dominates the battlefield simultaneously controls world financial and energy markets.
In recent years, financial institutions and research bodies have been developing and utilizing hybrid AI models that quantify geopolitical risks by using natural language processing (NLP) and deep learning and that predict crude oil and gas prices (Reference Material 1). Amid the progressing Iran Crisis, these latest AI models are operating in real time, calculating the worst-case scenarios for the closure of the Strait of Hormuz and risk premiums, at speeds that far surpass human traders, thereby forming market prices.
AI scans for "military conflict" and other keywords from news and social networks on a millisecond timescale, compares them with past conflict patterns and instantly takes long positions in crude oil and LNG futures. The current extreme volatility in energy prices is not caused by human fear, but by representations of fear calculated by advanced algorithms.
There is no need to worry excessively over oil: the true weakness lies in LNG.
So, how should Japan prepare for the worst-case scenario of the closure of the Strait of Hormuz which is an outcome that AI is actively projecting?
According to the analysis of scenarios on Japan's energy security (References 2 and 3 co-authored by Kitamura and Managi), even if the supply of oil from the Middle East is disrupted, short-term panic is unnecessary, because the Japanese government and private companies maintain massive oil stockpiles, which function as a strong buffer against supply disruptions. With regard to naphtha, which is a key feedstock for the chemical industry, there is concern over a potential shortage, but it is unlikely that any critical shortage will occur in other oil products.
On the other hand, what our study warns as the most serious weakness in Japan's energy security is a disruption to the supply of city gas accompanying an LNG supply disruption. LNG requires storage at extremely low temperatures, making it difficult to stockpile a large volume for a long period of time, unlike oil. If supply were disrupted, it would exert serious impacts broadly on non-energy intensive industries (such as the food industry and the textile industry) through to the supply of city gas to general households (a shortage of 10% to 15% of demand).
Required political responses and data-driven decisions
The era of Japan over-reacting to Middle East oil crisis fears is over. As long as oil stockpiles function properly, Japan can remain calm. However, AI-driven global financial markets will mercilessly target Japan's true weakness, the vulnerability in its gas supply.
Therefore, the policy responses Japan must urgently undertake are clear. We must diversify LNG procurement routes including U.S. shale gas that would avoid other chokepoints, and pre-establish legal frameworks for restrictions on the use of city gas in emergencies. Moreover, ensuring the operation of nuclear power plants and renewable energy facilities will also become a powerful means of easing the risks of fossil fuel supply disruptions.
In a new age where AI holds the initiative in both military and market arenas, the national government must ascertain the strengths and weaknesses of the country objectively based on past data and make tough policy decisions.
March 6, 2026
>> Original text in Japanese
