Japan’s stock market rebounded sharply Monday as investors digested Donald Trump’s remarks suggesting the U.S. could end its conflict with Iran within three weeks, alongside unexpectedly strong business sentiment data. The Nikkei 225 index surged 1.8%, its best day since February, as traders bet on reduced geopolitical risks and improved economic momentum.

The Tankan business survey, a key gauge of corporate confidence, exceeded forecasts with a 3.2% gain in March 2024, signaling resilience in Japan’s export-driven sectors. Analysts noted the survey’s rebound reflects optimism about global demand recovery and domestic policy stability. This dual catalyst—diplomatic progress and robust economic indicators—drove foreign investor inflows, pushing equities to a two-week high.

Trump’s comments on Iran, though non-binding, eased fears of prolonged Middle East tensions disrupting energy markets or supply chains. Markets had previously priced in uncertainty after the U.S. withdrew from the 2015 nuclear deal in 2018. Analysts cautioned, however, that sustained optimism hinges on verifiable steps toward de-escalation.

Tokyo Stock Exchange trading volume spiked as institutional investors rebalanced portfolios, favoring cyclical stocks like automotive and machinery sectors. While the rally highlights short-term confidence, long-term trends will depend on how swiftly U.S.-Iran relations normalize and whether Japan’s core machinery orders sustain their 2.1% monthly growth. Bolder gains loom if diplomatic breakthroughs materialize.