Japan’s Nikkei Stock Average Plummet as Middle East Conflict Widens (UPDATE 1)　

Reuters

12:04 JST, March 3, 2026 (updated at 16:33 JST)

TOKYO, March 3 (Reuters) – Japanese shares fell at the sharpest pace in months on Tuesday, as investors remained on edge for a second straight day following the U.S.-Israeli strikes on Iran.

The Topix .TOPX slumped 3.2% to 3,772.17, the fastest decline since April, while the Nikkei .N225 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 fueling 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.

All 33 industry subindexes on the Tokyo bourse were down, led by a 5.5% fall in the oil and coal .IPETE.T sector followed by a 5.4% decline in the transport equipment .ITEQP.T industry.

Toyota Motor 7203.T, the world’s largest automaker by sales, dropped 6.1%, the sharpest drop since September 2024, while Japan’s largest airline, ANA Holdings 9202.T, fell 3.3%.

ENEOS Holdings 5020.T, 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 4506.T 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.