Japan's Nikkei falls as US-Israel war with Iran escalates

By Satoshi Sugiyama

TOKYO, March 3 (Reuters) - Japan's Nikkei share average fell on Tuesday, as investors remained on edge for a second straight day following the U.S.-Israeli strikes on Iran.

The Nikkei .N225 fell 1.2% to 57,384.38 as of 0135 GMT while the broader Topix .TOPX also shed 1.2% to 3,850.48.

"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.

The transport equipment .ITEQP.T and the oil and coal .IPETE.T sectors slipped 3.9% each.

Toyota Motor 7203.T, the world's largest automaker by sales, slipped 5.5%, while Japan's largest airline ANA Holdings 9202.T lost 2.2%.

ENEOS Holdings 5020.T, Japan's biggest refiner, lost 4.3%, the sharpest drop since November last year.

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

Sumitomo Pharma 4506.T tanked 15% as investor concerns over a new share issuance outweighed an upward revision to its full-year net profit forecast for the current fiscal.

There were 194 decliners on the Nikkei index against 30 advancers.