Japan's Nikkei slides as Middle East stalemate fuels oil, inflation concerns

TOKYO, Aug 18 (Reuters) - Japan's Nikkei share average fell on Tuesday, putting it on course to snap a five-day winning streak, as a stalemate in the Middle East conflict drove oil prices higher and renewed concerns about bond market risks and inflation.

The Nikkei .N225 dropped 1.1% to 68,460.56 by late morning, after a 5.5% gain over the previous five trading sessions.

The broader Topix .TOPX eased 0.2% to 4,177.50.

A truce between the U.S. and Iran expired this week, with Washington ruling out extending a ceasefire and Tehran saying it would shift to a "fully offensive" military posture.

Crude oil climbed as traffic through the crucial Strait of Hormuz shipping corridor again ground to a halt, and concerns about global inflation saw bond yields jump, including in Japan. JP/O/R

"Rising interest rates tend to highlight the relative overvaluation of share prices," said Wataru Akiyama, an equities strategist at Nomura Securities.

"Underlying concerns regarding persistently high inflation — which are present in both Japan and the U.S. — could well act as a drag on the stock market going forward."

At the same time, shipping stocks benefited from expectations for higher freight rates, and marine transport was the best performer .ISHIP.T among the Tokyo Stock Exchange's 33 industry groupings, rallying 4.1%.

AI stocks were split, with startup investor SoftBank Group 9984.T rising 2.7%, while chip-testing equipment manufacturer Tokyo Electron 8035.T dived 4.3%.

(Reporting by Kevin Buckland; Editing by Sherry Jacob-Phillips)

((Kevin.Buckland@thomsonreuters.com;))