TOKYO: Japanese shares traded sharply lower on Monday, dragged by chip-related shares, with risk appetite being hurt as tensions in the Middle East escalated.

The Nikkei index fell 1.64% to 31,786.78 by the midday break, while the broader Topix lost 1.28% to 2,279.29.

“As risks for the Middle East rose, investors braced for further declines in markets and cut their long positions in stocks,” said Takehiko Masuzawa, head of trading at Phillip Securities Japan.

The Nikkei 225 volatility index jumped 4.29%, the most since Oct. 4 when the Nikkei lost 2.3% in its biggest daily decline in two months.

On Friday, the S&P 500 and the Nasdaq fell as deteriorating consumer sentiment data and the Middle East conflict soured investors on riskier bets. The Dow Jones Industrial Average inched up 0.12%.

Heavyweight chip-related stocks fell, tracking U.S. technology stocks, with Tokyo Electron and Advantest falling 3.18% and 4.53%, respectively.

Technology start-up investor SoftBank Group slipped 1.38%.

Bucking the trend, Lawson jumped 3.1% after raising its annual profit forecast on robust performance at its convenience stores.

Ryohin Keikaku surged 11.48% after the operator of retail outlet brand Muji reported an annual profit forecast that beat market consensus.

All but three of 33 industry sub-indexes on the Tokyo Stock Exchange fell.

Energy explorers jumped 3.02% to become the top performer among the sub-indexes, with Inpex jumping 3.2% to become the top performer on the Nikkei.

Refiners rose 1.6%, with Eneos Holdings rising 2.33%.

Reuters