Japan's Nikkei slides as Middle East stalemate fuels oil, inflation concerns

On Tuesday, Japan's Nikkei share average fell, threatening to end a five-day winning streak as tensions in the Middle East conflict led to a rise in oil prices and increased worries about bond market risks and inflation. The Nikkei dropped 1.1% to 68,460.56 by late morning, having gained 5.5% over the previous five trading sessions. The broader Topix fell 0.2% to 4,177.50.

An agreement between the US and Iran expired that week, with the United States declining to prolong the ceasefire while Iran announced it would adopt a "fully offensive" military stance. Crude oil surged as shipments through the vital Strait of Hormuz shipping lane were once again halted, and inflation concerns saw bond yields rise, including in Japan.

Wataru Akiyama, an equities strategist at Nomura Securities, commented on the situation, stating that rising interest rates typically expose the overvaluation of share prices. He also noted that concerns about persistently high inflation in both Japan and the US could weigh on the stock market in the future. Meanwhile, shipping stocks profited from expectations of higher freight rates, making them the top performer among the Tokyo Stock Exchange's 33 industry groupings, with a 4.1% increase.

AI stocks were mixed, with investment firm SoftBank Group up 2.7% but chip-testing equipment maker Tokyo Electron falling 4.3%.