Japan's Nikkei gains on Middle East optimism; SoftBank jumps

By Junko Fujita

TOKYO, March 26 (Reuters) - Japan's Nikkei share average rose on Thursday, led by SoftBank following a surge in its chip-unit shares, as cautious optimism grew that tensions in the Middle East could ease.

The Nikkei .N225 was up 0.61% at 54,075.00, as of 0137 GMT, and on track for a three-session rally, if the momentum persists.

The broader Topix .TOPX gained 0.21% to 3,658.35.

"The market expectations for the early end of the war are not as strong as the Nikkei's gains in the past several sessions are limited," said Shuji Hosoi, senior strategist at Daiwa Securities.

"The index trades still below the 25-day average of 55,300. That signals the market remains cautious over the fate of the war," he said.

Wall Street's main indexes closed higher on Wednesday as oil prices fell while Iran reviewed a U.S. proposal to end the Middle East conflict, feeding investor hopes for a de-escalation in the fourth week of a war that has disrupted global energy flows and stoked inflation concerns.

SoftBank Group 9984.T surged 6.2% after shares of Arm Holdings jumped 20% overnight, following the SoftBank-controlled company's forecast that its new data-centre chip could generate billions of dollars in annual revenue.

Other artificial intelligence-related shares climbed, with fibre optic cable makers Fujikura 5803.T and Furukawa Electric 5801.T rising 8% and 5%, respectively.

Chip-testing equipment maker Advantest 6857.T dropped nearly 1% to weigh on the Nikkei the most.

The mining and shipping sectors .IMING.T, .ISHIP.T jumped 3.93% and 2.06%, respectively, to become the top-performing sector, a sign that investors bet on the conflict will prolong, said a strategist at a domestic firm.

Office equipment maker Ricoh 7752.T fell 4.34% to become the worst percentage loser in the Nikkei.

Of the more than 1,600 shares trading on the Tokyo Stock Exchange's prime market, 57% stocks declined, 38% rose and 3% traded flat.