Japan's Nikkei falls 4% on fears of inflation, higher rates from Iran war

TOKYO, March 23 (Reuters) - Japan's Nikkei share average fell 4% on Monday as concerns about escalation of the Middle East war stoked inflation fears and the potential for higher interest rates globally.

The Nikkei .N225 was down 3.8% to 51,340.02 as of 0018 GMT and the broader Topix .TOPX fell 3.36% to 3,488.08.

"If the Strait of Hormuz remains closed for a long time, the oil prices would rise further and speed up inflation," said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

"If the prices rise, global interest rates may be raised," he said.

Closure of the Strait of Hormuz would hit Japan hard. The country gets around 90% of its oil shipments via the strait.

Iran said on Sunday it would strike the energy and water systems of its Gulf neighbours if U.S. President Donald Trump followed through with a threat to hit Iran's electricity grid in 48 hours, extinguishing any hope of an early end to the war, now in its fourth week.

Trump on Sunday said Iran had 48 hours to open the vital strait, which is effectively closed for most vessels.

Chip-related shares led the Nikkei's decline, with Advantest 6857.T and Tokyo Electron 8035.T falling 5% and 2.29%, respectively.