Japan’s Nikkei share average rose on Wednesday as renewed enthusiasm for artificial intelligence-related stocks outweighed concerns over an escalation in the Middle East conflict, according to a report by Reuters.

The benchmark Nikkei 225 gained 0.43% to 65,549.88, recovering from an earlier decline, while the broader Topix index advanced 0.24% to 4,059.87.

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Investor sentiment was supported by signs of resilient demand linked to semiconductors and data centres. Business confidence among Japan’s major manufacturers climbed in September to its highest level since December 2021, helped by strong demand in those sectors, according to a monthly Reuters poll released on Wednesday.

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U.S. stocks had come under pressure overnight as investors assessed the impact of the Iran conflict and higher oil prices. However, the Philadelphia Semiconductor Index rose 1.3%, providing support for Japan’s technology and semiconductor-related shares.

Japanese cable makers also benefited from renewed optimism around AI infrastructure spending. Verizon’s multi-billion-dollar agreement with Corning to supply high-density optical fibre for AI infrastructure boosted shares of companies such as Fujikura, according to Maki Sawada, an equities strategist at Nomura Securities.

Japanese equities were also dealing with a stronger yen, which remained near a seven-month high amid expectations that the Bank of Japan could accelerate interest-rate hikes as soon as its meeting next week.

Analysts at Sony Financial Group said the market appeared to have largely priced in further yen appreciation, suggesting that investors could shift towards buying stocks on declines once the initial selling pressure eases.

Market breadth remained relatively weak, with 109 stocks advancing on the Nikkei 225 compared with 116 decliners.

Furukawa Electric was the best-performing Nikkei stock, rising 13.20%, followed by Fujikura, which gained 8.75%, and Lasertec, up 6.56%.

Kyowa Kirin was the biggest laggard, falling 5.12%. Sumitomo Pharma declined 5.02%, while Nikon lost 3.63%.