Tokyo's markets at the start of the week reacted acutely to escalating Middle East tensions. As military attacks by the United States and Israel on Iran intensified, concerns about disrupted oil supply emerged, triggering a chain reaction of turmoil across energy prices and financial markets.
The most pronounced movement has been in crude oil prices. The Tokyo crude oil futures market surged sharply, reaching its highest level in approximately one year. This increase reflects market concerns about potential restrictions on crude oil supply from the Middle East going forward. Particularly noteworthy is the impact on shipping through the Strait of Hormuz, a critical chokepoint in global petroleum distribution through which the majority of Japan's crude oil imports transit. Major trading company Itochu has already reported partial impacts on crude oil and petroleum product shipments from the Persian Gulf, indicating that disruptions are beginning to affect real economic activity.
The impact on equity markets has been equally severe. On the opening day of the week, the Nikkei 225 stock average fell sharply by over 1,500 points at one point. This selling pressure stems from market participants' concerns about the negative impact that rising oil prices would exert on Japan and the global economy more broadly. Investors fear that increased energy costs will squeeze corporate profitability while simultaneously raising consumer burdens, with these effects cascading throughout the broader economy.
Notably, domestic retail gold prices rose by more than 1,100 yen per gram during the same week, approaching record levels. Gold traditionally functions as a safe-haven asset, and its price movement vividly illustrates market psychology as investors flee to safety when geopolitical and military risks escalate.
For Japan's economy, the greatest concern is the possibility of prolonged disruption to Strait of Hormuz shipping. Japan depends on the Middle East for approximately 90 percent of its crude oil imports, a dependency level particularly elevated among developed nations. Should shipping disruptions persist for several weeks, cascading negative effects would emerge: rising gasoline prices, increases in electricity and gas utility charges, and mounting transportation costs.
Currently, government and corporate officials are closely monitoring the situation on the ground, with developments following this week being subject to intense scrutiny. In the short term, increased market volatility is unavoidable, and investor risk-aversion sentiment will intensify. Simultaneously, the duration of this crisis has become a critical factor determining market direction.
At present, many observers express concern about further military escalation in the Middle East. Cyberattacks have also been reported, suggesting that the conflict may extend beyond conventional military dimensions. Japan's economy faces a critical test of its resilience.