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by Satoshi Sugiyama
The collapse of peace negotiations between the United States and Iran and the U.S. Navy’s plan to block the Strait of Hormuz have cast new doubts on the sustainability of the ongoing ceasefire, Nikkei reported on Monday.
The Nikkei .N225 was down 1% at 56,357.40, midday, after posting its strongest weekly gain in over a year last week. The broader Topix .TOPX slipped 0.5% in volatile trading to 3,721.78.
U.S. President Donald Trump declared on Sunday that the U.S. Navy would begin blocking the Strait of Hormuz, a chokepoint for 20% of the world’s daily energy supplies that Iran has effectively closed since the end of the war at the end of February. The announcement sent oil prices soaring above $100 a barrel at the start of Monday’s trading.
“I don’t think there were many investors expecting everything to be agreed upon (during the weekend negotiations) and to go smoothly,” said Shuutaro Yasuda, market analyst at Tokai Tokyo Intelligence Laboratory.
“That being said, this is obviously not good news, and stocks are falling. But I think this is precisely why we are not seeing a really extreme selloff.”
Among the 33 industrial sub-indices of the Tokyo Stock Exchange, energy exploration stocks .IMING.T stood out with a 3.2% gain. On the other hand, electric and gas .IEPNG.T and airline .IAIRL.T shares each lost 1.8%.
Market breadth was negative, with 162 decliners versus 62 advancers in the Nikkei, led by losses in semiconductor-related stocks.
Ibiden 4062.T, a chip packaging and electronics company, recorded the biggest decline among the shares, dropping 4.3%. Tokyo Electron, a major semiconductor equipment manufacturer, also weighed heavily on the index with a 3.7% decrease.
Nevertheless, strong corporate earnings helped limit the market sentiment downturn, according to Hiroshi Namioka, chief strategist and fund manager at T&D Asset Management.
Yaskawa Electric 6506.T, a maker of industrial robots and motion control systems, was one of the largest percentage gainers on the Nikkei, rising 5.7%. Ryohin Keikaku 7453.T, operator of the MUJI brand, increased by 4.6% before limiting its gains to 1.3%.
“While the market as a whole is mindful of earnings, when it comes to sector selection, there is no doubt that movements are being driven by expectations for crude oil prices,” Mr. Namioka stated.
