Note: This article is based on information available as of March 2026.
Hey Sheep, I keep hearing about a war in the Middle East and oil prices going crazy. Does that affect our stocks too?
Great question, Kabu! It actually has a huge impact. The events from late February to March 2026 significantly moved stock markets around the world, including Japan. Let me walk you through what happened and why.
What Happened?
Start from the beginning — what actually took place?
A lot happened in just one month. Here are the key events:
- Feb 28: The US and Israel launched joint military strikes against Iran, targeting nuclear and military sites
- Mar 2: Iran closed the Strait of Hormuz. Tanker traffic dropped by more than 90%
- Mar 11: The IEA (International Energy Agency) authorized a record release of 400 million barrels from strategic oil reserves
- Mar 23: President Trump announced a pause in strikes. Oil fell 11% in one day
- Mar 26: The UN Security Council adopted a ceasefire resolution (13-0-2)
All of that in just one month!?
Exactly. That is why the market impact was so significant. Now let me explain why a faraway war affects stock prices at home.
Why Does a Faraway War Affect Our Stocks?
That is my biggest question. Iran is so far from Japan — why does the Nikkei drop?
The key is oil. Let me explain step by step.
The Strait of Hormuz: The World's Oil Highway
The Strait of Hormuz is a narrow waterway at the mouth of the Persian Gulf — just 33 km wide at its narrowest point. About 20% of the world's seaborne oil passes through here. It is the world's oil highway.
And that got blocked!?
Yes. When it is blocked, oil tankers from the Middle East cannot get through. Supply drops dramatically, and prices shoot up.
Higher Oil → Higher Costs → Stock Pressure
When oil prices surge, the costs of gasoline, electricity, shipping, and raw materials all go up. Japan imports nearly all of its oil, so it is especially vulnerable.
Higher costs mean lower profits for companies. When investors worry about shrinking earnings, they tend to sell stocks. The chain works like this:
War → Strait blocked → Oil supply drops → Oil prices spike → Company costs rise → "Profits might fall..." → Stocks get sold
This is a general tendency, not a guaranteed outcome.
So everything is connected through oil! I had no idea.
Exactly! There is one more important factor — investor psychology.
The Fear Factor
When unpredictable events like war happen, investors tend to think: "I want less risky stuff right now." This is called risk-off. Stocks are volatile assets, so they get sold first during risk-off moments.
So everyone gets scared and sells → prices drop even more?
That can happen, yes. Human psychology plays a big role in how markets move.
The Numbers
OK, I get the mechanics. Show me the actual data!
Here is a summary of how major indicators moved:
| Indicator | Before | Most Moved | Change |
|---|---|---|---|
| Nikkei 225 | 59,332 (Feb 26) | 52,728 (Mar 9) | -11% |
| S&P 500 | 6,879 (Feb 27) | 6,477 (Mar 26) | -7%+ |
| Brent Oil | ~$89 (late Feb) | $120 (peak) | +69% |
| USD/JPY | 156 (late Feb) | 159.70 (Mar 26) | Yen weakened ~3.7 |
Nikkei 225: Down About 11%
What does an 11% drop actually feel like?
If you held 1 million yen in stocks, your portfolio would have dropped to about 890,000 yen. On March 9, intraday losses exceeded 4,200 points — a massive single-day move with very heavy trading volume.
S&P 500: Down Over 7%
The S&P 500 tracks 500 of the largest US companies. It fell over 7%.
The VIX index — the "fear index" — jumped from 16.1 in February to 24.3 in March. Higher numbers mean more investor anxiety.
The "fear index" — that sounds scary!
The name is dramatic, but it is actually a useful tool for seeing how nervous investors are feeling. Think of it as a thermometer for market anxiety!
Oil: Up 69%
Brent crude (the international benchmark) surged from $89 to $120 — a 69% spike. The IEA responded with the largest strategic reserve release in history: 400 million barrels.
USD/JPY: Yen Weakened
Why would a war cause the yen to weaken?
Oil is traded in US dollars globally. When oil prices rise, demand for dollars increases. Plus, Japan's trade deficit grows when energy imports cost more — both push the yen weaker. The rate moved from 156 to 159.70 per dollar.
Past Conflicts
Has this happened before? Is this the first time war affected stocks?
Not at all. Let me show you some historical data — but remember, these are past facts, not predictions.
Past events are reference only. The same patterns may not repeat.
Gulf War (1990)
Iraq invaded Kuwait → Oil: $17 to $36 (+90%). S&P 500: -16.9%. After coalition counterattack: S&P 500 recovered +13.6%. (Past trends may not apply to the future.)
Iraq War (2003)
On invasion day: S&P 500 +2.3%. Markets had already fallen beforehand. By year-end: +30%. (Past trends may not apply to the future.)
Soleimani Strike (2020)
S&P 500: -0.7%, fully recovered within 72 hours. Limited military scope was key. (Past trends may not apply to the future.)
Every situation plays out differently!
Exactly. The scale, duration, geography, and whether oil supply is truly disrupted — all of these vary. That is why you cannot say "it worked this way before, so it will again."
Summary
Let us wrap up what we learned today:
- The US-Israeli military operation against Iran in late February 2026 triggered major global market volatility
- The Strait of Hormuz carries about 20% of the world's seaborne oil; its closure drove oil prices up 69%
- Higher oil raised corporate cost concerns, contributing to an 11% Nikkei decline and 7%+ S&P 500 decline
- The IEA authorized a record 400 million barrel strategic reserve release
- Past conflicts showed varied market reactions — no two situations are the same
- As of late March 2026, the situation remained fluid
I never knew oil and stocks were so connected. I am going to keep learning!
That curiosity is what matters most, Kabu. Understanding how world events connect to markets will completely change how you see the news!
Disclaimer: This article is for general educational purposes only and does not constitute a recommendation to buy or sell any securities. All investment decisions should be made at your own discretion and responsibility.