Japan equity morning memo: Expecting another moderate reversal after fresh Middle East shock

Research evidence excerpt

Japan equity morning memo: Expecting another moderate reversal after fresh Middle East shock

Global Markets Research

Japan equity morning memo: Expecting another 9 July 2026moderate reversal after fresh Middle East shock

EQUITY: JAPAN STRATEGY

Research AnalystsNo sign of investors dropping equities for bonds

Macro strategyor gold

Tomochika Kitaoka - NSC

tomochika.kitaoka@nomura.comQuick Note +81 3 6703 1815

Fresh flare-up in geopolitical risk

On 8 July, US President Donald Trump said with respect to the US-Iran ceasefire

agreement that “To me, I think it’s over”. This has turned the market’s attention back to

geopolitical risks after a period of several weeks in which the topics of AI and

semiconductors had almost exclusively dominated the discussion. Front-month WTI crude

oil futures momentarily jumped up to over $76/bbl, and Nikkei 225 futures briefly dropped

to below 66,000, but then the rise in crude oil took a breather and Nikkei 225 futures

recovered to above 67,000. US equities started the day down on 8 July, but energy stocks

and semiconductor stocks eked out gains, while US bond yields rose and gold futures fell.

There was thus no sign that investors were fleeing equities and shifting into bonds or gold

instead.

Index futures register an immediate reaction, but…

The minute-by-minute market data since March shows that a $10/bbl rise in the price of

WTI crude oil futures tends to immediately prompt a drop of around 3,000 points (around

4–5%) in the Nikkei 225. The sensitivity of corporate earnings is such that each rise of

$10/bbl in the oil price lowers TOPIX EPS by 1%–1.25%, and so it makes sense to expect

that steep declines in index futures initially registered after a significant rise in the WTI

price will gradually fade.