Japanese Shares Rise Despite US-Iran Tensions

Asian equity markets rose on Monday even as US-Iran tensions intensified over the weekend following renewed disruptions in the Strait of Hormuz. The US seized an Iranian-flagged cargo vessel in the Gulf of Oman, while Tehran reasserted control over the Strait of Hormuz after Washington refused to lift its blockade on Iranian ports. Ongoing instability in the critical shipping lane has triggered a severe energy supply shock, heightening inflation risks and posing a threat to global growth, with oil-importing economies in Asia particularly exposed. Despite the geopolitical backdrop, shares across Australia, Japan, South Korea, Hong Kong, and China all posted gains.

The Nikkei 225 Index rose 0.6% to above 58,800, while the broader Topix Index gained 0.8% to 3,790 on Monday, recouping losses from the previous session even as US-Iran tensions escalated again. The US seized an Iranian-flagged cargo vessel in the Gulf of Oman, while Tehran reasserted control over the Strait of Hormuz following Washington’s refusal to lift its blockade on Iranian ports. Ongoing disruptions in the strategic waterway have triggered an unprecedented energy supply shock, heightening inflation risks and threatening global growth, with oil-importing economies such as Japan particularly exposed. However, Japanese equities had rallied to fresh record highs last week, supported by optimism over a potential peace deal and renewed enthusiasm for artificial intelligence-driven sectors. Among notable gainers were Lasertec (5.2%), SoftBank Group (1.9%), Fujikura (1.7%), Mitsubishi Heavy (4.7%), and Keyence (2.1%).

The Nikkei 225 dropped 1.75% to close at 58,476 on Friday, retreating from record highs as investors adopted a cautious stance ahead of the weekend while awaiting progress in US-Iran peace negotiations. In the latest developments, US President Donald Trump expressed confidence that the conflict with Iran could end soon, saying Tehran had agreed to terms including abandoning nuclear ambitions and reopening the Strait of Hormuz. He also announced a 10-day ceasefire between Israel and Lebanon, a step that could help advance further US-Iran talks. Meanwhile, Bank of Japan Governor Kazuo Ueda provided no clear signal on interest rates ahead of the central bank’s policy decision this month, highlighting the challenge of balancing upside risks to inflation against downside risks to growth. Technology and AI-related stocks led the decline, with notable losses from Kioxia Holdings (-9.6%), Fujikura (-2.7%), Advantest (-1.8%), SoftBank Group (-2.6%), and Lasertec (-4.4%).