JAPEX Shares Drop as Middle East Tensions Drive LNG Costs and Production Risks

Japan Petroleum Exploration Co. (TYO:1662), commonly known as JAPEX, saw its shares tumble on Monday after warning that escalating Middle East tensions could negatively impact earnings. The company cited rising liquefied natural gas (LNG) procurement costs and disrupted oil production as key risks, triggering investor concerns and pushing its stock down as much as 9.3% to 2,130 yen.

The primary issue stems from supply disruptions in the Persian Gulf, particularly around the Strait of Hormuz, a critical global energy transit route. JAPEX revealed it has been forced to secure replacement LNG cargoes through the spot market after regular shipments were affected by what it described as a de facto blockade. This shift to spot purchases is significantly more expensive than long-term contracted supplies, increasing operational costs and putting pressure on profit margins.

Despite these challenges, JAPEX reassured stakeholders that it has successfully secured alternative LNG supplies and does not anticipate disruptions to Japan’s domestic gas or electricity supply. However, the financial burden of sourcing higher-cost LNG remains a major concern for the company’s near-term outlook.

Compounding the issue, JAPEX also reported a suspension of operations at the Garraf oil field in Iraq. The halt follows a force majeure declaration by the Iraqi government, leaving production paused indefinitely and cutting off a key revenue stream. The lack of visibility on when operations might resume adds further uncertainty to the company’s earnings forecast.

While higher global crude oil prices and a weaker Japanese yen could provide some financial upside, JAPEX cautioned that these potential gains may not fully offset the increased LNG costs and lost production income. The company is currently evaluating the full financial impact of these developments and plans to include updated projections in its fiscal 2027 earnings outlook, scheduled for release in May.

Investors will be closely monitoring JAPEX’s next update as geopolitical risks continue to influence global energy markets and corporate performance.