The Nikkei 225 Index dropped 3.3% to below 51,700, while the broader Topix Index fell 3.2% to 3,494 on Monday, with both benchmarks slipping to their lowest levels in more than two months as the Middle East conflict entered a fourth week with no sign of easing.
President Donald Trump warned he would order strikes on major Iranian power facilities if the Strait of Hormuz is not reopened to shipping soon, while Tehran vowed to target key US and Israeli assets across the region should its energy infrastructure come under attack.
Persistently elevated oil prices intensified inflation worries and reinforced a hawkish bias among major central banks. The Bank of Japan left interest rates unchanged last week but signaled it is prepared to tighten policy further.
Technology, financial and consumer shares led the selloff, with notable declines in Kioxia Holdings (-4.4%), Advantest (-5.4%), Tokyo Electron (-3.0%), Mitsubishi UFJ (-4.6%) and Fast Retailing (-3.6%).
