Japan's Nikkei slips to one-month low as Middle East conflict intensifies

By Junko Fujita

TOKYO, March 4 (Reuters) - Japan's Nikkei share average fell for a third session to a one-month low on Wednesday, as investors sold risk assets amid an intensifying Middle East conflict.

The Nikkei .N225 slid 3.61% to 54,245.54, its lowest since February 6, marking the biggest daily decline in 11 months. The index wiped out all gains since Prime Minister Sanae Takaichi's landslide victory in the national election on February 8.

The broader Topix .TOPX lost 3.67% to 3,633.67.

Both the Nikkei and Topix rose to record highs last month as investors bet that Takaichi's stimulus measures would drive growth in corporate profits. Demand for materials needed for artificial-intelligence technology had also supported the fast-paced rally which is now unwinding.

"Investors who bought Japanese stocks after Takaichi's decisive win at the election dumped the shares in the latest sessions," said Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management.

Ueno sees the 52,000 mark, a level the index traded at in late January before Takaichi announced the snap election, as a defensive line for the Nikkei.

"The index may keep slipping once it falls below that level," he said.

The Nikkei volatility index .JNIV rose to its highest since August 2024 on Wednesday, reflecting stronger demand for protection against stock-market declines.

Investors sold down risk assets, particularly the Nikkei and the KOSPI, which have recently outperformed other major indexes, said Kazuaki Shimada, chief strategist at IwaiCosmo Securities.

Deep drops in Korean stocks triggered a circuit breaker as the KOSPI .KS11 shed more than 11%, with two-day losses at 17%.

Israeli and U.S. forces pounded targets across Iran on Tuesday, prompting Iranian retaliatory strikes around the Gulf as the conflict spread to Lebanon, rattled global markets and sent oil prices soaring.

In Japan, chip-related heavyweights led the Nikkei's decline, with Advantest 6857.T and Tokyo Electron 8035.T falling more than 4% each. AI-technology investor SoftBank Group 9984.T lost 7.16%.

All 33 industry indexes slipped, with the oil refinery index's .IPETE.T 7.16% drop making it the worst performer.