Nikkei 225 Rises on Geopolitical Relief, Not Economic Shift

The Nikkei 225 rose nearly 2%, approaching 39,000, as investors shifted back into risk assets on renewed hopes of indirect U.S.-Iran talks. Export-heavy Japanese stocks led the move, with technology, automobile, and financial shares gaining on improved earnings outlooks supported by a weaker yen. Trading volume surged, confirming stronger participation. The rally was not driven by economic data or corporate news but by easing geopolitical fears that had been pressuring oil markets. Signals of potential diplomacy reduced the risk of Middle East escalation, calming oil price volatility and lowering global inflation uncertainty. That, in turn, lifted risk appetite and compressed risk premiums in equities. Analysts note the move hinges on continued diplomatic progress and oil prices holding below $85 per barrel. If talks stall, the gains could reverse quickly. Upcoming U.S. inflation data and Fed signals will also influence whether this sentiment shift holds. For now, the market is pricing relief, not growth.