The Nikkei 225 Index extended its decline on June 11, falling to ¥62,210 — its lowest level since May 22 — as a confluence of geopolitical and macroeconomic pressures weighed on Japanese equities. The benchmark has now dropped 8.40% from its year-to-date peak, approaching correction territory.
Geopolitical Tensions Drive Oil Surge
The primary catalyst for the selloff was an escalation in US-Iran hostilities. Overnight, President Donald Trump ordered fresh military strikes against Iranian assets, prompting retaliatory attacks by Iran on US interests in Kuwait and Bahrain. The exchange shattered hopes for a ceasefire and sent crude oil prices sharply higher. Brent crude breached the $94.30 resistance level, while West Texas Intermediate (WTI) climbed to $91 per barrel.
Japan, which imports the vast majority of its crude oil from the Gulf region, is particularly vulnerable to such price spikes. Analysts warn that sustained high oil prices will feed into domestic inflation, increasing pressure on the Bank of Japan (BoJ) to begin raising interest rates. The bond market is already pricing in this shift: the 10-year Japanese government bond yield rose to 2.68%, and the 2-year yield climbed to 1.41%.
Global Risk-Off Sentiment
The Nikkei's slump also reflects a broader global equity rout. US stocks suffered heavy losses on Wednesday, with the Dow Jones Industrial Average shedding over 950 points and the S&P 500 falling 120 points. The selloff extended across Asia: Hong Kong's Hang Seng Index dropped 1.45%, and South Korea's Kospi Composite fell to KRW 7,435, down sharply from its 2025 high of KRW 8,935.
Profit-taking and rising volatility have hit multiple sectors. Among the worst performers in the Nikkei 225 were Kawasaki Heavy Industries, Sumitomo Electric Industries, Sumitomo Pharma, TDK Corporation, and Mitsubishi Electric.
Technical Outlook
From a technical perspective, the Nikkei 225 has broken below key support levels. The index is now trading just above its 50-day exponential moving average (EMA) and has fallen to the Major S/R pivot point on the Murrey Math Lines chart. If selling pressure persists, the next major support level to watch is the psychological ¥60,000 mark.
For context, the Nikkei had previously rallied to a record high of ¥68,797 in early June, driven by optimism over corporate reforms and foreign inflows. However, the current retreat highlights the fragility of the rally in the face of external shocks.
Related coverage: Nikkei 225 Retreats from Record High Amid Rate Hike Concerns and Geopolitical Tensions and Dollar Index Steadies Near 99 as Iran Deal Hopes Weigh on Oil Prices.
This article is for informational purposes only and does not constitute financial advice.
