Tokyo’s stock market experienced a sharp downturn on Tuesday, March 3, 2026, as investors reacted to recent military actions involving the United States and Israel in Iran. The Nikkei average initially fell by more than 1,500 yen during trading, signaling a broad-based sell-off.
The Nikkei had previously seen three consecutive days of record closing highs, but the escalating tensions in the Middle East prompted a swift reversal. Trading began with a decline of over 700 yen, and the losses widened to exceed 1,500 yen at one point, according to reports from TV Asahi.
Contributing to the market’s woes was a surge in crude oil futures prices, driven by concerns that the Strait of Hormuz – a critical waterway for oil shipments – could be effectively closed. This impacted markets across the Americas, Europe, and Asia. The situation underscores the sensitivity of global energy markets to geopolitical events.
In currency markets, the Japanese yen weakened as the dollar strengthened amid the “risk-off” sentiment. The yen’s decline was also fueled by concerns about rising inflation and a potential deterioration in Japan’s trade balance due to higher oil prices. The exchange rate reached the 156 yen level against the U.S. Dollar.
The Nikkei 225 closed on March 2, 2026, down 739.03 yen from the previous trading day. At its lowest point during the session, the index fell to the 57,000 yen range, a drop exceeding 1,500 yen, IG reported. The attacks by the U.S. And Israel on Iran, and the subsequent development of a de facto closure of the Strait of Hormuz, weighed heavily on investor confidence.
While the overall market trend was negative, some sectors bucked the trend. Energy and shipping stocks saw gains, though these were overshadowed by broader concerns about the potential impact on the U.S. Stock market. The situation highlights the divergent reactions within the market to the unfolding geopolitical crisis.
The initial market reaction saw the Nikkei average fall 874.07 yen to 57,976.20 yen at the opening of trading on March 3, 2026, FNN Prime Online reported. The decline was swift, surpassing 1,500 yen at one point, with trading continuing in the 57,000 yen range. Concerns over potential disruptions to oil supplies, following reports of a possible blockade of the Strait of Hormuz and attacks on oil tankers by Iran’s Revolutionary Guard, contributed to the downward pressure.
Approximately 20% of the world’s oil consumption relies on tankers passing through the Strait of Hormuz. Prolonged disruption could significantly impact energy markets and further destabilize stock markets, analysts warn.
According to Nomura Securities, the key focus moving forward will be whether the rise in crude oil prices will be temporary or prolonged.
Meanwhile, U.S. Markets showed a mixed performance, with gains in defense-related stocks amid heightened geopolitical risk, Money Create reported.
