The Topix slumped 3.2% to 3,772.17, the fastest decline since April, while the Nikkei declined 3.1% ‌to close at ⁠56,279.05, ⁠the biggest drop since November last year, after falling as much as 3.4%.

“Ongoing gains in crude oil futures on worsening Middle East tensions, together with a stronger U.S. dollar and weaker yen, are fuelling views that inflation could accelerate,” said Maki Sawada, a strategist at Nomura Securities.

“This uncertainty, seen as potentially impacting future monetary ⁠policy, is ‌weighing on the equity market overall.”

The U.S.-Israeli air war against Iran escalated with no end in sight, ⁠as Israel struck Lebanon in response to Hezbollah attacks and Tehran continued launching missiles and drones at Gulf states hosting U.S. military bases.

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All 33 industry subindexes on the Tokyo bourse were down, led by a 5.5% fall in the oil and coal sector followed by a 5.4% decline in the transport equipment industry.
Toyota Motor, the world’s largest automaker ‌by sales, dropped 6.1%, the sharpest drop since September 2024, while Japan’s largest airline, ANA Holdings, fell 3.3%. ENEOS Holdings, Japan’s biggest refiner, lost ⁠6.3%, the sharpest drop since April.

The largest percentage decliner, though, had nothing to do with the Middle East tensions.

Sumitomo Pharma tanked 19.1%, the biggest fall in nearly 12 years, as investor concerns over a new share issuance outweighed an upward revision to its full-year net profit forecast for the current fiscal year.

There were 219 decliners on the Nikkei index against six advancers.