Nikkei Falls 0.66% as Middle East Tensions Weigh on Risk Sentiment
The Nikkei 225 declined 0.66% to close at ¥38,762 on Thursday as escalating tensions between the US and Iran dampened risk appetite across Japanese equity markets, with technology and financial stocks bearing the brunt of the selloff.
The broader TOPIX index also retreated amid the cautious trading environment, as investors digested reports of unraveling ceasefire talks and direct military exchanges between Washington and Tehran. The USD/JPY pair strengthened to ¥159.47, providing some support for export-oriented stocks but failing to offset broader market concerns about geopolitical instability.
Overnight developments in the Middle East dominated market sentiment, with Reuters reporting that Iran and the US had traded air strikes after diplomatic efforts stalled. The Iranian Revolutionary Guard Corps confirmed targeting a US airbase following strikes near Bandar Abbas, while Kuwait activated air defenses against missile and drone attacks. These escalating tensions sent gold to a two-month low as inflation fears resurfaced, weighing on global risk assets including Japanese equities.
SoftBank Group led decliners with a sharp 7.61% drop to ¥3,608.72, reflecting the tech conglomerate’s sensitivity to geopolitical uncertainty and its exposure to global markets. Industrial automation giant Fanuc fell 3.80% to ¥4,044.8, while financial services firm Orix declined 3.28% to ¥6,100.38. Major banks also retreated, with Sumitomo Mitsui Financial down 2.31% and Mizuho Financial losing 1.95%, as investors worried about potential economic disruption from Middle East conflicts.
However, defensive sectors provided some stability to the market. Takeda Pharmaceutical emerged as the session’s top performer, gaining 1.76% to ¥2,551.7 as investors sought refuge in healthcare stocks. Honda Motor also bucked the downtrend with a 1.74% rise to ¥4,247.04, benefiting from the weaker yen’s positive impact on automotive exporters. Nintendo added 0.54% to ¥1,753.8, while Toyota Motor managed a marginal 0.01% gain to ¥30,037.38, demonstrating the resilience of Japan’s automotive giants amid currency tailwinds.
With the Bank of Japan’s next policy meeting scheduled for April 28, 2026, market participants are closely monitoring Governor Ueda’s communications for any shifts in monetary stance. Current expectations favor a hold at the present rate, though focus remains on the central bank’s tone amid ongoing US-China trade uncertainties. Any dovish signals could further pressure the yen, while unexpected hawkish commentary might provide currency support.
Thursday’s session highlighted the Japanese market’s continued vulnerability to external shocks, particularly geopolitical developments that threaten global stability. While the weaker yen provided some cushion for exporters, the broader risk-off sentiment underscored investors’ preference for defensive positioning amid an increasingly uncertain international landscape.
This article is for informational purposes only and does not constitute investment advice. Please consult with a qualified financial advisor before making investment decisions.