Market Recap
Japan’s benchmark Nikkei 225 Index fell 0.8% on Thursday, snapping a three-day rally that had propelled it to its highest level since February 20. The broader Topix index also lost ground, slipping 0.6%, as global investors turned risk-averse amid escalating geopolitical tensions in the Middle East.
This retreat comes as the Israel-Iran conflict enters its seventh day, with heightened speculation over possible U.S. military involvement. President Donald Trump remained vague in remarks to the press, stating, “I may do it. I may not do it,” in response to questions about military strikes on Iranian nuclear sites.
Market Sentiment Dented by War Fears
“Heightened tensions in the Middle East continue to cool investor sentiment, with the downside appearing to widen,” said Fumika Shimizu, a strategist at Nomura. Investors have largely shifted out of equities into safer assets like government bonds and the yen, reinforcing the selloff in Tokyo stocks.
Of the 225 Nikkei constituents:
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48 advanced,
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175 declined,
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2 remained unchanged.
Top Gainers & Losers
The biggest gainer on the day was Nippon Steel Corp, which surged 4.3% after finalizing its $14.9 billion acquisition of U.S. Steel, a move viewed as strategically significant for global steel industry consolidation.
Major losers included:
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Taiyo Yuden: -3.1%
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Sumitomo Pharma: -3.0%
A Temporary Pause or Trend Reversal?
While the recent pullback may appear abrupt, it follows a strong rally fueled by optimism surrounding U.S.-China trade cooperation and positive tech sector earnings. However, the balance of risks has now shifted, with energy price volatility and geopolitical uncertainty likely to dominate investor focus in the near term.
Currency and Safe-Haven Dynamics
The Japanese yen, a traditional safe haven, appreciated 0.2% against the U.S. dollar, further weighing on export-oriented Japanese companies by reducing their overseas revenue when repatriated.
South Korean Markets Dip Amid Middle East Tensions as Tech Stocks Defy Broader Weakness
Conclusion
The Nikkei’s Thursday drop highlights how fragile investor confidence remains in the face of geopolitical instability. While Japan’s corporate fundamentals remain strong and trade ties are improving, external shocks continue to exert a powerful influence on Tokyo’s equity markets. Until clarity emerges around U.S. military intentions and Middle East developments, investors are expected to remain cautious.
