Japan's Nikkei tumbles as Iran stalemate stokes inflation worries

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%.

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.

"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."

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.