Why do tensions in the Middle East—especially disruptions near the Strait of Hormuz—trigger simultaneous stock market crashes and panic-driven fuel hoarding in Tokyo and Seoul?

Do nearly 100% of Middle Eastern oil and gas exports pass through the Strait of Hormuz? This waterway—narrowest at just 39 kilometers—handles 20% of the world’s crude oil and 20% of its liquefied natural gas (LNG) shipments. It is the irreplaceable ‘sole chokepoint’ on Japan and South Korea’s energy supply chains. Iran’s coastal anti-ship missiles can fully cover the strait’s inbound and outbound shipping lanes across a wide arc! Take Japan, for example: Following the Fukushima disaster, nuclear power restarts have persistently fallen short of expectations, while renewable energy adoption remains relatively low. As a result, thermal power’s share in Japan’s energy mix has rebounded to over 70%, further heightening dependence on imported crude oil and LNG. South Korea’s semiconductor and display industries form the core pillar of its manufacturing sector. Samsung Electronics’ semiconductor operations alone consume over 10% of the nation’s total electricity—and South Korea relies heavily on thermal power generation, with Middle Eastern oil and gas serving as the primary source of that electricity. Even the mere *expectation* of short-term shipping disruption in the Strait of Hormuz directly severs the upstream energy supply for both countries—a fatal risk their economies simply cannot bear. If such a disruption lasts more than six months, it could trigger GDP fluctuations of up to 3%. And should international oil prices surge to $150 per barrel, the consequences for these oil- and gas-import-dependent nations would be catastrophic: runaway costs for both daily life and industrial production. At present, aside from the United States, they have no viable geopolitical alternatives beyond political correctness. Moreover, from a macroeconomic fundamentals perspective, both Japan and South Korea are classic export-oriented manufacturing economies, with highly overlapping export sectors—automobiles, electronics, and semiconductors constitute the backbone and profit engine of both nations. A sharp rise in global oil prices immediately inflates manufacturing production and logistics costs, severely squeezing corporate profit margins. It then fuels broad-based imported inflation, pushing up domestic prices and household living costs—eroding consumer demand and further deteriorating corporate earnings outlooks. Even more critically, soaring oil prices force Japan and South Korea to expend larger portions of their foreign exchange reserves on energy imports, directly intensifying downward pressure on their currencies. Currency depreciation, in turn, raises the cost of energy imports even further—creating a vicious cycle of ‘rising oil prices → currency depreciation → surging inflation’, delivering a comprehensive blow to export-led growth. Furthermore, from a stock market structure standpoint, Japanese and Korean equity indices are heavily weighted toward energy-sensitive sectors, exhibiting a strong negative correlation between index performance and oil price movements. In South Korea’s KOSPI Index, the four largest constituents—Samsung Electronics, SK Hynix, Hyundai Motor, and Kia—collectively account for over 40% of the index. These firms are either high-energy-consumption semiconductor manufacturers or automobile OEMs acutely sensitive to oil prices. In Japan’s Nikkei 225 Index, key weightings include Toyota Motor, Sony, Mitsubishi Corporation, and Mitsui & Co.—either global automotive leaders or integrated trading houses that control Japan’s energy imports. Rising oil prices either directly compress their profits or inflate their import costs. Deteriorating earnings expectations trigger synchronized capital flight and mass sell-offs—culminating in parallel market crashes. Meanwhile, rising imported inflation pressures Japan and South Korea’s central banks to tighten monetary policy. Tighter liquidity further depresses equity valuations, creating a ‘double whammy’—a ‘Davis double-squeeze’—that amplifies the downturn. After all, the U.S. dollar in 2026 won’t be as weak as it was in 2025!

Goldman Sachs downgrades its target price for the Japanese Topix Index: A six-week disruption in the Strait of Hormuz could squeeze corporate profits.

Goldman Sachs has lowered its three-month, six-month, and twelve-month target prices for Japan’s TOPIX Index to 3,800, 4,000, and 4,200 points, respectively—citing sustained Middle East conflict driving up energy prices and exerting tangible pressure on Japanese corporate earnings. This revision signals a marked cooling in market expectations for a swift de-escalation of the Middle East crisis. According to Wind Trading Desk, Goldman Sachs released a research report on March 29, in which its commodities analysts raised their oil and natural gas price forecasts. Their base-case assumption now incorporates a six-week interruption of oil flows through the Strait of Hormuz, compounded by increased strategic reserve drawdowns. Building on this, Goldman’s Asia macro team updated its regional macro forecasts, prompting its Japan equity strategy team to lower the TOPIX’s target prices across all horizons—from previous levels of 3,900 / 4,100 / 4,300 points—by 100 points each. On the earnings front, the firm slashed its FY26 (fiscal year ending March 2026) earnings-per-share (EPS) growth forecast from 12.3% to 7.2%, primarily due to margin compression triggered by higher oil prices. This revised estimate sits nearly five percentage points below the market consensus of 12%, highlighting a significant divergence. Meanwhile, market sentiment remains fragile: During the week of March 16–19, both foreign and domestic institutional investors turned net sellers—only retail investors stepped in contrarily. The Hormuz Shock: The Earnings Gap Between Three Weeks and Six Weeks The core driver behind this downgrade is the upward revision of the base-case scenario—from a prior three-week disruption in Strait of Hormuz oil flows to the current six-week assumption. The earnings impact on Japanese corporations differs markedly under the two scenarios. Under the three-week disruption case, FY26 EPS growth is projected at 8.8%, with profit margins contracting by 0.3 percentage points; energy and trading companies contribute roughly +0.7 percentage points to overall EPS growth. Under the six-week disruption base case, however, FY26 EPS growth falls further—to 7.2%—with margin contraction widening to 0.5 percentage points. Although the positive contribution from energy and trading companies rises to +1.2 percentage points, it remains insufficient to offset the broader headwinds. GDP drag remains broadly similar across both scenarios—at approximately 0.6 percentage points. The report notes that the market consensus for FY26 EPS growth stands at 12%, whereas Goldman’s top-down forecast is only 7.2%—a gap of roughly five percentage points—suggesting that potential earnings downgrades remain significantly underpriced by the market. Insurance Sector Leads Gains; Defensive Rotation Dominates Over the past week, Japan’s stock market posted modest gains: the TOPIX rose 1.1% weekly, while the Nikkei 225 remained virtually flat. Yet internal composition diverged sharply—with defensive sectors and energy-related stocks significantly outperforming the broader market.

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