Nikkei 225 falls sharply amid Middle East tensions and inflation fears

The Nikkei 225 index ended a five-day winning streak, falling sharply due to geopolitical tensions in the Middle East and rising inflation concerns. The stalemate between the US and Iran, coupled with the expiration of a ceasefire, has driven crude oil prices higher and increased volatility in global markets.

Rising bond yields, fueled by fears of persistent inflation in both Japan and the US, have pressured equity prices. In Japan, the Nikkei plunged over 1,700 points, with significant losses seen in technology, semiconductor, and machinery sectors. Conversely, shipping and marine transport stocks saw gains due to expectations of higher freight rates resulting from disruptions in the Strait of Hormuz.

In the commodities market, gold prices faced pressure from rising global bond yields, though they previously saw support from a weakening US dollar and shifting expectations regarding Federal Reserve interest rate hikes. Investors remain focused on upcoming central bank communications for clues on future monetary policy amidst the ongoing energy and geopolitical uncertainty.