Japan’s Nikkei share average recorded its most significant weekly decline in over a month on Friday, as the ongoing uncertainty related to the Middle East conflict propelled oil prices upward, intensifying inflationary apprehensions. The Nikkei concluded the trading session at 66,016.36, reflecting a decline of 0.3%. Over the course of the week, the index has experienced a loss of approximately 4%, marking the most significant decrease since the week ending July 17. The broader Topix edged 0.2% higher in the latest session; however, it still recorded a 3.1% decline for the week, marking its worst performance since early March.
The U.S. will impose “the toughest sanctions in history” on Iran, Treasury Secretary Scott Bessent stated on Thursday, as Washington intensified economic threats in an effort to conclude the nearly six-month-old conflict. Crude oil experienced an increase of approximately $2 overnight. Japan acquires approximately 95% of its oil imports from the Middle East, with around 70% of these supplies transiting through the Strait of Hormuz. Inflation concerns have led to an increase in Japanese bond yields, as evidenced by the 10-year government note’s yield rising by 3 basis points to 2.875% on Friday.
Yields increase as bond prices decrease. “Profit-taking is likely heading into the weekend with oil prices and bond yields elevated amid the uncertain situation in the Middle East,” stated Maki Sawada. Shares of the heavily weighted Uniqlo operator Fast Retailing experienced a decline of 3.6%, positioning it as one of the most significant detractors in the Nikkei. AI-focused startup investor SoftBank Group experienced a decline of 2.5%. Despite the index’s decline, the number of gainers surpassed that of losers in the Nikkei, with 135 of its 225 constituents advancing, 86 declining, and four closing unchanged.
Shipping emerged as the leading sector among the 33 industry groups on the Tokyo Stock Exchange, surging 4.9% amid anticipations of increased freight rates, particularly as the vital Strait of Hormuz shipping route remains largely inaccessible. Mining, which encompasses oil explorers, experienced an increase of 2.2%, while oil and coal sectors saw a rise of 2.1%. – Reuters
