TOKYO: Japanese shares fell at the sharpest pace in months on Tuesday, as investors remained on edge for a ​second straight day following the U.S.-Israeli strikes on Iran.

The Topix slumped 3.2% to 3,772.17, the fastest decline since April, while the Nikkei declined 3.1% to close at 56,279.05, the biggest drop since November last year, after falling as much as 3.4%.

“Ongoing gains in crude oil futures ‌on worsening ‌Middle East tensions, together with a ​stronger ‌U.S. ⁠dollar ​and weaker ⁠yen, are fuelling views that inflation could accelerate,” said Maki Sawada, a strategist at Nomura Securities.

“This uncertainty, seen as potentially impacting future monetary policy, is weighing on the equity market overall.”

The U.S.-Israeli air war against Iran escalated with no ⁠end in sight, as Israel struck Lebanon ‌in response to Hezbollah attacks ‌and Tehran continued launching missiles ​and drones at Gulf ‌states hosting U.S. military bases.

All 33 industry ‌subindexes on the Tokyo bourse were down, led by a 5.5% fall in the oil and coal sector followed by a 5.4% decline in the transport equipment industry.

Toyota ‌Motor, the world’s largest automaker by sales, dropped 6.1%, the sharpest drop since ⁠September ⁠2024, while Japan’s largest airline, ANA Holdings, fell 3.3%.

ENEOS Holdings, Japan’s biggest refiner, lost 6.3%, the sharpest drop since April.

The largest percentage decliner, though, had nothing to do with the Middle East tensions.

Sumitomo Pharma tanked 19.1%, the biggest fall in nearly 12 years, as investor concerns over a new share issuance outweighed an upward revision to its full-year net profit forecast for the current ​fiscal year.

There were 219 ​decliners on the Nikkei index against six advancers.

REUTERS