Goldman Sachs announced a downward revision to its price targets for Japan's TOPIX index on Sunday, pointing to an anticipated hit to earnings growth from elevated energy costs connected to an extended conflict in the Middle East.
The bank lowered its TOPIX targets to 3,800 points for the three-month horizon, 4,000 points for six months and 4,200 points for 12 months. These figures replace prior targets of 3,900, 4,100 and 4,300 points respectively.
Goldman Sachs said the revisions reflect expectations for higher oil and gas prices driven by what it sees as sustained disruptions to maritime flows through the Strait of Hormuz. The assessment was made in the context of a wider regional escalation, where the U.S.-Israel war on Iran showed few signs of de-escalation and hostilities appeared to broaden after an attack on Israel by Yemen's Houthis over the weekend.
On the earnings side, the bank cut its fiscal year 2026 earnings per share growth estimate for the TOPIX to 7.2%, down from a previous forecast of 12.3% made before the conflict began. That revised forecast assumes a base case scenario of a six-week impact from disruptions in the Strait of Hormuz.
Goldman Sachs also described market sentiment as fragile, noting that expectations of a rapid resolution to the Middle East fighting had fallen substantially. The bank said recent market pricing had started to incorporate the prospect of prolonged energy-related shocks.
The TOPIX endured a steep pullback in March, posting a 10.2% loss as markets reacted to the onset of the Iran war. The bank linked those losses to investors pricing in greater energy-related disruption to Japan's economy as well as broader supply chain interruptions resulting from reduced shipping activity through Hormuz.
March's drop halted an 11-month winning streak for the TOPIX, a run that had included a sequence of record highs over the prior year. Despite the setback, Goldman Sachs observed that stocks with primarily domestic exposure remained relatively robust, and that insurers and defensive sectors continued to show strength. Pharmaceuticals and healthcare were singled out as recent outperformers.
Market context and implications
The bank's action links projected higher energy costs and constrained shipping flows to weaker corporate earnings for the TOPIX as a whole, prompting both target cuts and a lower EPS growth outlook for fiscal 2026 under the assumed six-week disruption scenario. At the same time, sector dispersion persisted, with defensive and domestically focused names retaining relative appeal.