Asian stocks drop, with Japan’s benchmark leading losses

Nikkei 225 declined 2.6%, while the broader TOPIX index slipped 2%

Asian stocks dropped on Thursday, with Japan’s benchmark leading losses after the Bank of Japan kept interest rates unchanged and flagged rising uncertainty over inflation as surging oil prices and escalating Middle East war clouded the outlook.

The Bank of Japan held its short-term policy rate at 0.75%, as widely expected, choosing to pause tightening while officials assessed risks from imported inflation and external shocks.

Policymakers said the future course of the Middle East war and crude oil prices could affect Japan’s inflation path, especially given the country’s heavy reliance on energy imports.

Board member Hajime Takata dissented from the decision, calling for a 25 basis-point hike, underscoring growing concern within the board that persistent price pressures may require a firmer response.

Nikkei 225 declined 2.6%, while the broader TOPIX index slipped 2%.

KOSPI shed 1.3%, while Straits Times Index edged down 0.5%.

Shanghai Composite and Shanghai Shenzhen CSI 300 slid 1% each, while Hang Seng index slipped 1.5%.

Oil prices remained a major driver of sentiment after Brent crude surged above $110 a barrel on Wednesday and extended gains in Asian trade on Thursday.

The latest jump followed Iranian attacks on several energy facilities across the Middle East after a strike on Iran’s South Pars gas field.

Qatar said Iran’s attack caused extensive damage to the Ras Laffan energy hub, while Saudi Arabia reportedly intercepted attacks targeting energy infrastructure.

The widening war has heightened fears of prolonged supply disruption through the Strait of Hormuz, a route handling around a fifth of global oil and liquefied natural gas flows.

Elsewhere, S&P/ASX 200 dropped 1.5% after data showed that the country’s unemployment rate rose in February as full-time jobs declined.

Futures tied to Nifty 50 added 0.4%.