Nikkei Braces for Further Losses as Strait of Hormuz Closure Sparks Geopolitical Alarm

The Japanese stock market is poised for a difficult opening on Monday as geopolitical tensions escalate following the closure of the Strait of Hormuz over the weekend. This development threatens to erase recent gains and pivot the regional sentiment toward a bearish outlook, overriding the positive momentum seen in Western markets. On Friday, the Nikkei 225 snapped a three-day winning streak, plummeting 1,042.44 points, or 1.75%, to close at 58,475.90. The decline was broad-based, hitting financial, technology, and automotive sectors. Notable losses included Softbank Group, which tumbled 3.10%, Panasonic Holdings, which plummeted 3.30%, and Mitsubishi UFJ Financial, which tanked 2.60%. Automotive giants Toyota and Nissan also retreated 1.44% and 1.30%, respectively. The volatility comes after a brief period of optimism. Wall Street had rallied on Friday—with the Dow jumping 1.79% and the NASDAQ rising 1.52%—following reports that Iran had reopened the strait and a 10-day ceasefire was established between Israel and Lebanon. This temporary reprieve caused West Texas Intermediate (WTI) crude to dive 10.58% to $84.11 per barrel, easing immediate supply concerns. However, the weekend closure of the strait has effectively neutralized those gains for Asian markets. Traders now anticipate a gloomy start to the week as supply-side concerns for crude oil return, likely weighing heavily on energy-dependent economies like Japan and disrupting the recent rally in global equities.