Japan's Nikkei 225 Stock Average rose 0.4% on July 26, led by airline and auto stocks, as fears of a further escalation in the Iran conflict eased temporarily. The advance extends a relief rally that saw the Nikkei surge 3.26% on July 21, its biggest single-day gain in weeks.
Japan's Nikkei 225 Stock Average rose 0.4% on July 26, led by airline and auto stocks, as fears of a further escalation in the Iran conflict eased temporarily. The advance extends a relief rally that saw the Nikkei surge 3.26% on July 21, its biggest single-day gain in weeks, as dip buyers returned to chipmaker and AI-infrastructure stocks, according to Barchart data.
Airline and auto stocks led the advance, though specific sector-level percentage moves were not disclosed. The broader Topix index also gained, tracking the Nikkei higher. The rally comes after a period of heightened volatility driven by escalating US-Iran tensions, including 11 consecutive days of US strikes on Iran and Iranian retaliation against US bases in Bahrain, Kuwait, and Jordan.
The easing of geopolitical fears provided a tailwind for risk-sensitive sectors like airlines and autos, which had been pressured by rising crude oil prices. WTI crude oil recently climbed to a six-week high above $80 per barrel as disruptions to shipping through the Strait of Hormuz mounted, threatening supply routes critical to Japanese energy imports. Investors now await further developments in US-Iran diplomatic efforts and the next round of corporate earnings for directional cues.
The Nikkei's 0.4% gain follows a volatile period for Japanese equities. On July 22, the Nikkei had surged 1.1% to 66,869.57, while the Topix rose 0.5% to 4,052.96, according to GuruFocus data, as optimism around capital expenditure by major US tech companies boosted sentiment toward Japanese semiconductor and AI-related stocks. China's Shanghai Composite also closed up 1.79% on July 21, reflecting broader regional relief from the temporary de-escalation in Middle East hostilities.
The Iran conflict remains the dominant macro risk for Japanese markets. The US conducted an 11th straight day of attacks on Iran in an effort to degrade the country's ability to threaten commercial shipping in the Strait of Hormuz, while Iran retaliated by striking US bases in Bahrain, Kuwait, and Jordan. The Houthi rebels have also threatened to blockade Saudi-linked shipping in the Red Sea, raising the risk of further oil supply disruptions. For Japan, a major crude importer, sustained oil price strength poses a risk to corporate margins and consumer spending. Any further escalation in Middle East hostilities could reverse the current relief rally and pressure the Nikkei toward recent lows.
This article is for informational purposes only and does not constitute investment advice.
