(March 10): Japanese stocks bounced back as a fall in oil prices eased some concerns around the Middle East conflict. Still, investors remained on alert as US President Donald Trump said the war will not end this week.
In early trade, the Nikkei advanced as much as 3% while the broader Topix Index rose 2.3%.
The climb comes after oil prices tumbled following Trump’s comments that the Iran conflict was nearly over. Prices had spiked to nearly US$120 a barrel on Monday, contributing to the Nikkei’s sharpest decline since April. Japan gets around 90% of its oil from the Middle East and so is vulnerable to supply disruptions.
Fear surrounding the Iran crisis seems to be retreating after oil’s decline and Trump’s comments, said Hideyuki Ishiguro, chief strategist at Nomura Asset Management.
“Even during yesterday’s sharp drop, there was a fair amount of bargain hunting at the bottom and investors’ buying appetite still appeared strong,” he said. Purchases may support stocks in the morning but the upside could be limited, he said.
However, with oil prices still elevated above US$80 per barrel and no clear resolution to the Iran conflict in sight, the market will remain cautious, he added. Worries about credit risk also continue to weigh on financial stocks, “so it is premature to call for a general bullish outlook", Ishiguro said.
See also: Japan’s stock market a safe haven in turbulent times
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