The movement of the USD/JPY has a significant direct correlation with WTI crude. They move in tandem as Japan imports approximately 95% of its crude oil from the Middle East, and oil fuels Japan’s key export-oriented sectors like automotive and manufacturing.
Hence, without any clear signs from the US and Iran to reopen the Strait of Hormuz, a critical waterway for global oil and energy flows, it increases the risk of stagflation in Japan, putting the BoJ in a dilemma to maintain its “gradual interest rate hike” monetary policy stance (a negative for the JPY).
The WTI crude oil has rallied by 38% since 17 April 2026 to trade at an intraday level of $110/barrel at this time of writing, erasing its losses since the start of the US-Iran ceasefire agreement on 7 April.
The recent hawkish messaging from the US White House administration towards Iran, continuation of the US Navy blockage in the strait, Trump’s rejection of Iran’s latest proposal to reopen the waterway, and the latest report by Axios, today, that highlighted US military commanders are set to present President Trump with fresh options for military action against Iran on Thursday, 30 April.
Given that the USD/JPY has a high direction correlation of 0.72 (20-day rolling) with WTI crude oil, with the near-term bullish trend remaining intact for WTI crude oil (three consecutive daily closes above its 20-day moving average at $99.50/barrel), there is a high probability that the USD/JPY is likely to face further upside pressure in the near-term (see Fig. 1).
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