Nikkei Drops 5%, JGB Yields Jump as Hormuz Closure Bites
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- Nikkei 225 slumped as much as 5% earlier in the session, wiping out all of its gains for the year after surging to a record 59,332.43 last month on expectations that PM Sanae Takaichi's stimulus plan would accelerate corporate growth.
- The Strait of Hormuz remains closed, and Japan gets around 90% of its oil shipments via the passage, leaving the index trading 14% below its record high on Monday.
- Iran said on Sunday it would strike the energy and water systems of its Gulf neighbors if Trump followed through on a threat to hit Iran's electricity grid in 48 hours, extinguishing hopes of an early end to the war now in its fourth week.
- Trump gave Iran 48 hours to open the vital strait, which is "effectively closed for most vessels," per the source.
- The 10-year Japanese government bond yield jumped 6 basis points to 2.320%, its highest point since January 21, as bond prices fell.
- The Bank of Japan held rates steady on Thursday but kept the door open to an early rate hike, warning that surging oil prices could exacerbate inflationary pressures.
- Chip-related shares led the decline, with Advantest falling 5.8% and Tokyo Electron dropping 3.1%; 94% of the more than 1,600 stocks on the TSE prime market declined, with only 4% advancing.
Why it matters: Japan depends on the Strait of Hormuz for 90% of its oil imports, leaving the Nikkei uniquely exposed to a war now in its fourth week. The index has shed 14% from its record high, 94% of TSE prime stocks declined, and 10-year JGB yields hit their highest since January 21—challenging the BOJ as it weighs further rate hikes against oil-driven inflation.
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