Japanese stocks fell sharply in early trading, with the Nikkei Stock Average down 2.2% at 64930.03, dragged by declines in chip-related shares. The sell-off followed comments from Fed Chair Kevin Warsh on Friday, which boosted expectations for further U.S. interest rate hikes.

Among the hardest hit names, Advantest dropped 7.8%, while SoftBank Group slipped 4.2% and Tokyo Electron declined 3.8%. The dollar edged up to 160.00 yen, compared to 159.48 yen at Friday’s close in Tokyo.

Investors remained cautious, monitoring geopolitical tensions after U.S. forces targeted two Iranian rocket launchers in the Strait of Hormuz on Sunday. Market participants are also keeping a close eye on oil price movements amid ongoing developments in the Iran conflict.