Major Japanese trading houses expect higher profits as Iran war drags on

Japanese trading houses including Marubeni and Mitsui expect higher fiscal-year profits, with Marubeni forecasting a record net profit of 580 billion yen, up 6.6%, and Mitsui guiding for a 10% increase to 920 billion yen. The outlook is supported by elevated commodity prices tied to the U.S.-Israeli war on Iran and disruptions around the Strait of Hormuz, though Japanese utilities are warning of higher LNG procurement costs and profit declines. The article points to a positive earnings backdrop for commodity-exposed firms but broader energy-market and geopolitical risk for import-dependent Japan.

Analysis

The market is still pricing this as a one-factor oil story, but the more durable signal is cross-asset dispersion: upstream commodity-linked balance sheets are getting a near-term earnings tailwind while regulated or quasi-regulated importers are absorbing a lagged cost shock. That creates a classic timing mismatch where asset-light commodity holders re-rate immediately, but fuel-cost pass-through businesses only feel the pain over the next 1-2 quarters as contract resets and hedges roll off.

For Berkshire, the real exposure is not the headline commodity inflation, but the concentration of its Japanese industrial stakes in names that benefit from pricing power and foreign-exchange/commodity optionality while being insulated from direct fuel import risk. The second-order effect is that stronger reported profits at those holdings may support buybacks and capex, which can compound intrinsic value even if the macro shock fades. Conversely, any sustained squeeze on Japanese utilities can pressure domestic demand and political appetite for tariff hikes, subsidy extensions, or utility balance-sheet support.

The contrarian view is that the market may be overestimating the persistence of the supply premium if diplomatic de-escalation or coordinated maritime protection reduces the perceived Hormuz risk faster than physical barrels tighten. In that case, the losers are the most levered price-sensitive beneficiaries, while the better relative trade becomes a quality-vs-cyclical rotation within Japan rather than a blanket long-energy trade. The setup favors expressing the view with limited-duration options rather than outright cash equity exposure, because the catalyst path is binary and could compress quickly if shipping routes normalize.

Key Decisions for Investors

• Long BRK.B vs short a Japan utilities basket for 1-3 months: Berkshire’s indirect exposure to commodity-positive Japanese industrials should outperform if elevated energy prices persist, while utilities face delayed fuel-cost pass-through risk.
• Buy call spreads on a Japanese trading-house proxy over 6-12 weeks: express the view through names with commodity leverage and balance-sheet optionality; cap upside with spreads because the trade is vulnerable to a fast geopolitical unwind.
• Short utilities on any further rally in LNG/oil-linked procurement stress, but keep the position tactical and hedged with sector index calls; the risk/reward improves only if forward fuel curves stay elevated into the next reporting cycle.
• Pair long integrated energy with short airlines or industrials for 1-2 quarters: the market is likely underpricing the lagged margin compression outside the energy complex as input costs work through earnings.
• Avoid chasing outright Brent-beta here; prefer options. A short-dated strangle on oil-related equities can monetize the binary nature of the Hormuz headline risk, since either de-escalation or escalation can break the current range quickly.