Middle East conflict accelerates nuclear expansion in Japan and South Korea

The Middle East conflict is reinforcing energy security as a central pillar of power planning in Japan and South Korea, with coal generation providing a significant near-term buffer. During the current shoulder season, coal fleets could offset up to 70% of gas-fired generation in Japan and more than 100% in South Korea of the same season last year, according to new analysis from Wood Mackenzie. 

While both markets remain relatively insulated from immediate fuel supply disruption, the crisis is accelerating structural shifts toward nuclear expansion, slower coal retirements and the localisation of clean energy supply chains.

Limited short-term exposure to LNG disruption 

Unlike many Asia-Pacific markets, Japan and South Korea face manageable near-term risk from potential LNG supply disruption through the Qatar–UAE corridor. According to Wood Mackenzie, Japan’s direct exposure to the disruption is around 6%, compared with approximately 15% for South Korea. 

“Diversified procurement and long-term contracts provide Japan and South Korea with multiple layers of protection, delaying the impact of fuel price volatility on power end users,” said Xiaonan Feng, principal analyst, Asia Pacific power and renewables research at Wood Mackenzie. “However, the broader policy implications of the crisis are likely to be long-lasting.” 

In Japan, fuel cost pass-through is delayed by around three to six months due to bilateral pricing mechanisms. In South Korea, the cost-based power pool and retail tariff caps help limit short-term volatility, although this places additional financial strain on Korea Electric Power Corporation (KEPCO). 

Coal provides critical system flexibility 

During the current shoulder season, coal fleets could offset up to 70% of Japan’s and more than 100% of South Korea’s gas-fired generation based on 2025 levels, if utilisation rates increase significantly. This flexibility, however, is seasonal and would decline during peak summer months when coal plants are already operating at higher capacity. 

“Coal continues to play an important role as a strategic reserve for both countries, particularly during periods of fuel market stress,” Feng said. 

Japan’s position is further supported by the restart of five nuclear reactors since 2022, adding 4.6 GW of baseload capacity that is insulated from fossil fuel price volatility. 

Nuclear policy momentum strengthens  

In Japan, the transition from post-Fukushima nuclear minimisation to expansion is now firmly established, making nuclear power an essential for long-term energy security. This policy shift is expected to provide stable electricity to meet rising demand, particularly from data centres, and reduce reliance on fossil fuel imports. Similarly, in South Korea, nuclear power continues to gain policy and public support. The government has identified nuclear as critical to meeting future electricity demand, with the potential for additional capacity beyond current plans. Decisions on lifetime extensions for approximately 7.8 GW of reactors due to reach design limits by 2030 will be key to the country’s energy mix, according to Wood Mackenzie. 

Renewables strategy shifts toward localisation 

At the same time, both markets are increasingly prioritising domestic supply chains within their energy transition strategies. Japan is reassessing its reliance on imported solar panels while focusing on next-generation technologies such as perovskite cells and expanding offshore wind capacity. South Korea has already moved to favour domestically manufactured equipment in recent offshore wind and battery storage auctions, signalling a shift toward localisation over lowest-cost deployment. 

Outlook dependent on duration of disruption 

The extent of market impact will depend on the duration of the conflict, Wood Mackenzie noted. If disruptions persist into peak summer demand, the effectiveness of coal as a buffer will diminish, increasing exposure to tighter supply conditions. 

A stronger US dollar could also amplify cost pressures by increasing fuel import costs in local currency terms. 

“The immediate risks are manageable, but the long-term direction is clear,” Feng concluded. “Energy security considerations will continue to accelerate nuclear expansion, delay coal retirements and drive greater emphasis on domestic energy supply chains in both markets.”