Japan's Nikkei set for worst week in over a month amid Middle East uncertainty

TOKYO: Japan’s Nikkei share average slipped on Friday, putting it on course for its worst week in more than a month, as uncertainty surrounding the Middle East conflict lifted oil prices and fanned inflation fears.

The Nikkei eased 0.3% as of the midday recess, setting up a 4% weekly loss, the biggest since the week ended July 17.

The broader Topix declined 0.1%, on track for a 3.4% weekly slide.

The US will impose “the toughest sanctions in history” on Iran, Treasury Secretary Scott Bessent said on Thursday, as Washington ramped up economic threats in a bid to end the nearly six-month-old war. Crude oil jumped about $2 overnight.

Inflation concerns lifted Japanese bond yields, with the 10-year government note’s yield rising 3 basis points to 2.875% on Friday.

Yields rise when bond prices fall.

“Profit taking is likely heading into the weekend with oil prices and bond yields elevated amid the uncertain situation in the Middle East,” said Maki Sawada, a strategist at Nomura Securities.

Heavily weighted Uniqlo operator Fast Retailing slumped 4% and was a major factor in the Nikkei’s losses.

AI-focused startup investor SoftBank Group sank 1.3%. Overall, the Nikkei’s performance was fairly balanced, with 119 of its 225 components falling, 103 rising and three trading flat.

Shipping was the top performer among the Tokyo Stock Exchange’s 33 industry groups, rallying 2.8% amid expectations for higher freight rates, with the crucial Strait of Hormuz shipping route remaining effectively closed.