Japan's Nikkei tumbles as Iran stalemate stokes inflation worries

Japan's Nikkei share average snapped a five-day winning streak on Tuesday, as a stalemate in the Middle East conflict drove up oil prices and renewed worries over bond market risks and inflation.

The Nikkei .N225 slid 2.5% to end at 67,460.73, after a 5.5% gain over the previous five trading sessions.

The broader Topix .TOPX lost 1.1% to 4,140.22.

A temporary ceasefire between the U.S. and Iran expired this week, with Washington ruling out extending the deal and Tehran saying it would shift to a "fully offensive" military posture.

Crude oil climbed as traffic through the crucial Strait of Hormuz shipping corridor again ground to a halt, and concerns about global inflation saw bond yields jump to multi-decade highs, including in Japan. JP/O/R

"Rising interest rates tend to highlight the relative overvaluation of share prices," said Wataru Akiyama, an equities strategist at Nomura Securities.

"Underlying concerns regarding persistently high inflation — which are present in both Japan and the U.S. — could well act as a drag on the stock market going forward."

Growth stocks were a particular focus of selling, and the worst performer among the Tokyo Stock Exchange's 33 industry groupings was electrical appliance makers .IELEC.T, which dropped 3.7%.

The sub-index includes chip-making tool manufacturer Tokyo Electron 8035.T and chip-testing equipment maker Advantest 6857.T, which dived 6.2% and 5.1%, respectively.

At the same time, shipping stocks benefited from expectations for higher freight rates, and marine transport was the best-performing sub-index .ISHIP.T, rallying 3.6%.