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By Junko Fujita

TOKYO, March 19 (Reuters) - Japan's Nikkei fell on

Thursday as investors weighed the impact of the Middle East

conflict on corporate growth, while markets also focused on how

the Bank of Japan will respond to the Iran war-linked oil shock

in its policy decision later in the day.

The Nikkei was down 2.8% at 53,689.78, as of 0108

GMT, while the broader Topix slipped 2% to 3,639.78.

"Investors are seeing that the Middle East conflict will

drag on, and they weigh the downward pressure on corporate

earnings," said Wataru Akiyama, a strategist at Nomura

Securities.

Oil prices settled higher on Wednesday and climbed further

in extended trade after Iran attacked several energy facilities

across the Middle East following a strike on its South Pars gas

field, a major escalation in its war with the U.S. and Israel.

A surge in oil prices is weighing on Japan's

import-dependent economy by pushing up inflation, raising

manufacturing costs, and threatening to slow economic growth.

All but two of the Tokyo Stock Exchange's 33 industry

sub-indexes dropped. The shipping and mining sectors

rose 0.58% and 0.44%, respectively, suggesting the

market's bets on the war to prolong, Akiyama said.

The BOJ is expected to keep its interest rates steady after

it concludes a two-day policy meeting later in the day, but

market views on the future rate path are divided as the Middle

East conflict continues to add to domestic price pressures.

Shares related to Japanese chipmakers and artificial

intelligence dragged the Nikkei lower, with Advantest ( ADTTF )

and Tokyo Electron ( TOELF ) down 5% and 2.43%, respectively.

SoftBank Group lost 4%.

Of more than 1,600 stocks trading on the TSE's prime market,

94% fell and 4% advanced, while 1% traded flat.