Nikkei Plummets 5% | Japan Stocks Hit by Middle East Fears

Tokyo stocks plunged Monday morning, with the Nikkei 225 Stock Average briefly falling over 5 percent, as tensions between the United States and Iran escalated and crude oil prices surged. The Nikkei closed down 3.40 percent at 51,556.70, after an earlier drop of over 2,600 points, according to Kyodo News.

The sell-off followed a social media post by U.S. President Donald Trump on Sunday, Japan Standard Time, threatening to “obliterate” Iran’s power plants if Tehran does not fully reopen the Strait of Hormuz within 48 hours. Iran responded with threats to target energy infrastructure and desalination facilities in Gulf nations if its power plants are attacked, according to reports from Reuters.

The broader Topix index also declined, falling 2.98 percent to 3,501.71. The declines reflect investor concerns about potential disruptions to global energy supplies and a broader economic slowdown, particularly given the ongoing conflict in the Middle East, now entering its fourth week, according to CNBC.

Trump’s ultimatum came after air raid sirens sounded across Israel on Sunday, warning of incoming missiles from Iran, following attacks in the southern Israeli cities of Arad and Dimona. Israel subsequently announced it was striking Tehran in response, further escalating the conflict.

The price of West Texas Intermediate crude oil briefly topped $100 per barrel amid the crisis, according to Kyodo News. Asia Nikkei reported that Iranian Parliament Speaker Mohammad Baqer Qalibaf warned that attacks on Iranian power plants would lead to retaliatory strikes on energy and oil infrastructure across the region, potentially “irreversibly destroy[ing]” critical infrastructure.

Qalibaf also extended the threat to financial entities purchasing U.S. Treasurys, warning they would be considered legitimate targets alongside military bases, according to CNBC. Brent crude lost 0.25% to $111.97 per barrel in early trading Monday.

The Strait of Hormuz is a vital shipping lane for global energy flows, with approximately one-fifth of the world’s oil and liquefied natural gas transiting the waterway. Iran has threatened to close the strait completely if attacked, a move that would severely disrupt global energy markets.