Bareksa.com - Japan's Nikkei share average fell to a fresh 2 1/2-week low on Friday morning as fears for Iraq escalated, with oil shares soaring on rising oil prices.

The Nikkei dropped 0.8 percent to 14,855.72 in midmorning trade. It fell as low as 14,830.99, the lowest since June 2. For the week, the index has shed 1.5 percent.

Inpex Corp jumped 3.6 percent to 1,621 yen, the highest since April 2011 and Japan Petroleum Exploration rose 1.6 percent after oil prices jumped to nine-month highs on Thursday as fears rose that escalating conflict in Iraq could disrupt supply from OPEC's second-largest producer.

"Geopolitical tensions in Iraq have hit risk appetites. People are concerned as developments in Iraq could have a big impact on oil prices and the U.S. market, and there could be
repercussions in Japan," said Hiromichi Tamura, chief strategist at Nomura Securities.

Sunni Islamist militants, who took over Iraq's second-biggest city Mosul earlier this week, extended their advance south toward Baghdad and surrounded the country's largest refinery in the northern town of Baiji on Thursday.

Market participants, citing estimates by local brokerages, said that Nikkei futures and options contracts expiring in June likely settled at 14,807.72. The official settlement price will be announced by the Osaka Securities Exchange after the market closes.

They added that the Nikkei will likely be supported at the settlement level for the time being.

The broader Topix dropped 0.8 percent to 1,228.02, while the JPX-Nikkei Index 400 slipped 0.8 percent to 11,176.27.

Exporters were lower, with Toyota Motor Corp dropping 1.2 percent, Honda Motor Co falling 1.9 percent and Fanuc Corp declining 1.2 percent. (Source : Reuters)