Japan’s Nikkei share average experienced a decline on Monday as investors assessed the corporate outlook in light of the renewed conflict in the Middle East, which has led to an increase in oil prices. The Nikkei experienced a decline of 1.92%, settling at 67,242.73, whereas the broader Topix registered a loss of 0.71%, closing at 4,007.49. “The market was concerned about increasing costs due ‌to the rise ⁠in ⁠oil prices, and this came as the earnings season for Japanese firms kicked off,” said Daisuke Hashizume.

Oil prices surged over 4% on Monday as energy shipments through the Strait of Hormuz faced ongoing threats, following announcements of renewed military strikes by the U.S. and Iran. Chip-related stocks exerted downward pressure on the Nikkei, as Advantest and Tokyo Electron experienced declines of 3.39% and 2.25%, respectively. Memory maker Kioxia experienced a decline of 12.86%. “As the market eyes memory prices, the Nikkei ⁠is being influenced by South Korea’s benchmark index, which is heavily weighted toward memory makers, such as SK Hynix,” said Daiwa’s Hashizume.

The Nikkei extended its losses later in the session as South Korea’s benchmark KOSPI experienced a significant decline, prompting the activation of circuit breakers to temporarily halt trading. Shares in SK Hynix declined over 15% on Monday as investors realised profits, following a notable U.S. listing that propelled the world’s leading AI memory chipmaker to a 12.8% increase during its Nasdaq debut on Friday. In Japan, Yaskawa Electric declined 14.34% to a daily limit low of 5,972 yen following a 21.7% decrease in the robot maker’s first-quarter net profit.

Gains in bank shares, resulting from a shift in investor focus towards value stocks rather than AI-related shares, mitigated the decline of the Topix. Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group experienced increases of 2.31% and 1.63%, respectively. Among the over 1,500 stocks listed on the prime market of the Tokyo Stock Exchange, 36% experienced an increase, 60% saw a decline, and 2% remained unchanged.