The Nikkei 225 index in Japan ended Thursday's session nearly unchanged, as market participants closely monitored developments in the Middle East. The index managed to recover from its morning losses after the United States confirmed that overnight airstrikes on Iran had concluded.
The Nikkei index closed up 0.06% at 64,217.27 points, rebounding from a nearly 3% drop earlier in the day, although a large number of stocks still finished in negative territory. The broader Topix index declined by 0.45% to settle at 3,830.35 points.
Naoto Takahashi, an analyst at Aizawa Securities, commented that there currently appears to be a lack of sufficiently strong catalysts to attract substantial new capital inflows. He noted that investors remain somewhat cautious, suggesting that even with some buying activity emerging, the market is not yet prepared for a definitive upward breakout.
Market sentiment improved after the US announced the end of airstrikes on Iran. This announcement came just hours after President Trump had warned of further attacks if a peaceful agreement was not reached.
Shuji Hosoi, a senior strategist at Daiwa Securities, stated that following the earlier announcement from the US military declaring the end of the strikes, investors interpreted it as a signal urging Iran to swiftly reach a deal.
This fostered a market perception that military action was also being utilized as leverage to seek a negotiated resolution, thereby fueling speculation that an agreement with Iran might be within reach.
AI-related stocks, which had previously weighed on the Nikkei index, pared some of their losses. Technology investment giant SoftBank Group initially plunged as much as 7.5% before closing 1.4% lower.
In a report, Ivailo Dikov, Head of Japan Equities at Eastspring Singapore, and client fund manager James Ying noted that Japanese corporate earnings could be impacted by rising input costs. However, they pointed out that the country's fiscal position provides the government with room to cushion against oil price shocks through recent cost-of-living support measures. The asset management firm maintains a constructive outlook on Japanese equities over the medium to long term.
The report added that while capital expenditure and earnings momentum in AI-related sectors remain robust, Eastspring is adopting a cautious strategy and is reluctant to chase elevated valuations. It further suggested that the software sector might present opportunities given its recent underperformance.
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