Japan's Nikkei 225 stock average surged past the 65,000 mark for the first time on May 25, 2026, closing at 65,158.19 in one report and reaching intraday highs over 65,400 according to others [1, 2, 3]. The Topix index also hit record intraday levels between 3,942 and 3,954 on the same day [1, 4, 2, 5].

The gains were fueled by optimism over a potential peace deal or memorandum of understanding between the U.S. and Iran. The agreement could end the war in the region and reopen the strategic Strait of Hormuz, a vital shipping lane for crude oil [1, 4, 2, 6, 3]. U.S. President Donald Trump confirmed over the weekend of May 23-24 that a deal had been largely negotiated but cautioned his representatives not to rush it [1, 4, 2, 6, 3]. He said, "An Agreement has been largely negotiated, subject to finalization between the United States of America, the Islamic Republic of Iran, and the various other Countries, as listed." and "Not to rush into a deal in that time is on [their] side." [6, 3]

The peace talk optimism caused crude oil prices to fall more than 5%, which improved risk sentiment and boosted Japanese government bonds and the yen [1, 4, 2, 6].

Semiconductor, AI-related, and technology companies led gains on May 25. Key stocks like Kioxia, Fujikura, and Lasertec rose between 11% and 14% as investors bought shares [1, 4, 2, 5]. Investor buying was partly driven by overseas short-term funds and margin trading by individual investors [4].

However, there was some caution near the 65,000 level, a psychological milestone, with selling pressure trimming gains late in the day [1, 2]. Maki Sawada, equities strategist at Nomura Securities, noted there remains uncertainty about the deal's durability, saying, "Even if an agreement is reached, there remains uncertainty regarding whether it will be adhered to, as the Iranian government may not be united on the issue." [1]

On the morning of May 27, the Nikkei briefly topped 66,000, reaching 66,428.81 before profit-taking trimmed gains. The Topix also set a record intraday high of 3,971.77 [5]. The rebound was supported by gains in U.S. tech stocks overnight, especially semiconductor shares like Micron Technology [5].

Japan's economy remains vulnerable to oil price spikes due to its high dependence on imported energy, making the possible reopening of the Strait of Hormuz crucial [1, 2]. The coming days will reveal whether the U.S.-Iran talks can be finalized and sustained, impacting market sentiment.