Japanese stocks declined after concerns over the escalating Iran war drove worries about the economic impact of steeper oil prices with the conflict entering its fifth week.
The Nikkei 225 Stock Average (^N225) fell 2.8% to 51,885.85, after paring some of its morning losses. The Topix slid 2.9% to 3,542.34, weighed down by electronics and banks. SoftBank Group Corp (SFTBY, 9984.T) and Mitsubishi Motors Corp were among the Nikkei’s worst performers.
Monday’s slide came after the Houthis joined the Iran war and additional US troops arrived in the Middle East. The developments pushed Brent above $116 per barrel, although it retreated slightly from its session highs in Tokyo’s afternoon.
“The Middle East conflict and its economic fallout is the biggest cloud hanging over Japanese equities,” said Nikos Tzabouras, a senior strategist at multi-asset trading platform Tradu.
Japan’s heavy reliance on the Middle East for oil imports makes it “uniquely vulnerable,” he said. “The risk from high gas prices is real, and could hit Japan’s manufacturing base which is still a cornerstone of the economy.”
Automaker Toyota Motor Corp. contributed most to the Topix’s decline, dropping 5.4%. Hitachi Ltd. also underperformed, falling 3.9%.
The equity selloff came alongside a renewed slide in the yen, which temporarily fell below 160 to the dollar and is trading near its weakest level since July 2024.
“The weak yen can do more harm than good — even exporters have to import things too,” said Tzabouras. “The yen’s weakening is tied to concerns over Japan’s fiscal position, and I wouldn’t expect any meaningful rebound soon.”
After outpacing most global benchmarks in the first two months of the year, the Nikkei is now headed for its biggest monthly fall since 2008. The benchmark will likely continue trading around the 50,000 level as oil prices stay elevated, said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management.
Monday was the ex-dividend date for many companies with fiscal years ending in March and September, which put extra pressure on the benchmarks as investors locked in payouts. Ex-dividend stocks pushed down the Topix by an additional 35 points and the Nikkei 225 by around 357 yen, according to Bloomberg-compiled data.
