Nikkei 225 slides as SoftBank, Tokyo Electron, and Kioxia stocks sink

The Nikkei 225 Index continued its freefall as technology companies like Softbank, Tokyo Electron, Kioxia, and Advantest plunged ahead of the upcoming big-tech earnings. It plunged by over 4%, reaching its lowest level since June 11. 

Japan stocks plunge as US-Iran war escalates

The Nikkei 225 Index plunged more than 4% on Monday as geopolitical risks intensified. Investor sentiment deteriorated after the conflict between the US and Iran escalated over the weekend, resulting in dozens of casualties. Two US servicemembers were killed, while US airstrikes on Iran reportedly left dozens of people dead, fueling fears of a broader regional conflict.

This fighting led to a surge in crude oil prices on Monday, with Brent hitting $90 and the West Texas Intermediate (WTI) hitting $85. This surge will likely continue if the war escalates this week. President Donald Trump has warned that the US will start targeting Iranian power and bridge infrastructure.

Iran, meanwhile, has warned that it will retaliate by targeting similar infrastructure across the region. In one such response, its military reportedly struck a desalination plant in Kuwait after the US attacked a comparable facility inside Iran, raising concerns that the conflict could spread beyond the two countries.

Japan is highly exposed to the crisis in the Middle East because it imports most of its oil from countries in the region. At the same time, rising oil prices means that the Bank of Japan may be forced to hike interest rates again this year. This explains why Japanese bond yields have soared.

Technology stocks are plunging

The Nikkei 225 Index slumped as companies in the technology sector plunged. Softbank stock dropped by over 9%, while Kioxia Holdings fell by 16%. Tokyo Electron fell by 8%, while Advantest declined by 7.2%.

Kioxia, one of the world's leading memory chipmakers, has seen its stock plunge 55% from its peak this year. The selloff has also reshaped Japan's corporate rankings, with Kioxia falling from the country's largest company by market capitalization to sixth place.

There are concerns about the AI sector as Chinese companies achieve major milestones. Moonshot’s Kimi K3 model has beaten Claude and ChatGPT in key measures, with the company now planning to go public in Hong Kong soon. Others like MiniMax and DeepSeek have achieved similar milestones in the past few months. 

Looking ahead, these tech names will react to the upcoming big-tech earnings in the United States. Alphabet and Tesla will release their earnings this week, while Microsoft, Amazon, and Meta will do the same next week. These companies will provide more information on whether they will continue their huge capital spending this year. 

Nikkei 225 Index technical analysis

Ni225 chart | Source: TradingView

The daily chart shows that the Nikkei 225 Index has slumped in the past few weeks, moving from the year-to-date high of 72,845 to the current 64,140. It has already dropped below the 50-day Exponential Moving Average (EMA). 

At the same time, it has invalidated the bullish outlook of the falling wedge pattern. It has done that by moving below the lower side of this pattern. Also, the Relative Strength Index (RSI) and the MACD indicators have continued falling.

Therefore, the index will likely remain under pressure in the near term. It may drop to the next key support level of 60,000 before bouncing back.