The Nikkei 225 fell as much as 7.6 percent, marking its sharpest decline since April 7, while the broader TOPIX dropped up to 6 percent, News.Az reports, citing Bloomberg.
Economically sensitive sectors, including technology and banking, were among the hardest hit, with SoftBank Group and Advantest each plunging more than 12 percent.
Japanese government bonds also declined amid a broader global bond selloff, while the Japanese yen weakened to its lowest level against the US dollar since January.
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The market downturn comes as oil prices surged toward $120 per barrel, with major producers reducing output as the conflict involving Iran entered its ninth day. Japan imports about 90 percent of its oil from the Middle East, leaving the country particularly vulnerable to supply disruptions and price spikes.
The decline in Japanese equities is especially notable given their strong performance earlier in 2026. The Nikkei had been outperforming major global indexes before the Iran crisis, supported by expansionary fiscal policies introduced by Sanae Takaichi.
Tokyo’s key stock benchmarks are now approaching a technical correction after falling more than 10 percent from their late-February peaks. The Nikkei has dropped more than 11 percent since the Iran conflict began and had already been underperforming the MSCI World Index and the S&P 500 before the weekend.
Meanwhile, the Nikkei’s one-year implied volatility gauge surged to its highest level since the pandemic on Monday, signaling growing concern among investors.
