The Nikkei slid 1.6% to 38,013.76 by the midday break, while the broader Topix was down 0.79% at 2,669.63.
Iran launched ballistic missiles on Tuesday, spurring vows from Israeli Prime Minister Benjamin Netanyahu that its arch foe would pay for the attack. Tehran said any retaliation would be met with “vast destruction”, raising fears of a wider war.
“The escalation in the Middle East has resulted in a classic risk-off reaction, posing headwinds for broader Japanese equities,” said Charu Chanana, global market strategist and head of forex strategy at Saxo.
Japanese technology shares led losses, following their U.S. peers lower after a near 3% drop on the Philadelphia SE Semiconductor index overnight.
Wall Street’s three main stock indexes also ended lower on Tuesday, with the Nasdaq losing more than 1%, as a risk-off mood spread following news of Iran’s attack. Tokyo Electron slipped 2.76%, Advantest fell 3.7%, and SoftBank Group was down 1.64%. Outside of tech, Uniqlo parent firm Fast Retailing shed 3.22% to weigh the heaviest on the Nikkei, among 155 of the index’s 225 constituents in the red.
Defence-related stocks were among the shares to gain following the news. Kawasaki Heavy Industries rose 1.62%, after rallying in the previous session on bets that the sector would benefit from the new Ishiba administration.
Inpex, up 4.97%, and other energy shares also rose, buoyed by a jump in oil prices on fears that the Middle East conflict could disrupt supply.
Oil and coal producers were among the best performers by sector, climbing about 3%, just behind miners , which advanced 4.86%.
