The Nikkei was down 1.6% at 38,013.76 by the midday break, while the broader Topix was down 0.79% at 2,669.63.
Iran launched ballistic missiles on Tuesday, prompting Israeli Prime Minister Benjamin Netanyahu’s pledge that his archenemy would pay for the attack. Tehran said any retaliation would be met with “massive destruction”, raising fears of a wider war.
“The rise in the Middle East has resulted in a classic risk-off reaction, creating headwinds for broader Japanese equities,” said Charu Chanana, global market strategist and head of forex strategy at Saxo.
Japanese technology shares led losses after the Philadelphia SE Semiconductor Index fell nearly 3% overnight, following their US peers.
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Wall Street’s three major stock indexes also ended lower on Tuesday, with the Nasdaq down more than 1%, as risk-off mood spread following news of the Iran attack.
Tokyo Electron was down 2.76%, Advantest 3.7% and SoftBank Group was down 1.64%.
Outside of tech, Uniqlo’s parent firm Fast Retailing was the top weight on the Nikkei, down 3.22%, with 155 of the index’s 225 components in the red.
Defense stocks rallied on the news. Kawasaki Heavy Industries rose 1.62%, after rallying in the previous session on bets that the new Ishiba administration would benefit the sector.
Inpex, up 4.97%, and other energy stocks also rose, buoyed by fears that the Middle East conflict could disrupt supplies.
Oil and coal producers were among the best performers by sector, climbing nearly 3%, trailing miners, which gained 4.86%.
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