Japan's Nikkei rises 2% as AI stocks rally, Middle East worries cap gains

Investors stayed away from active trade as Japan is in the midst of the "obon" summer holidays and toward the end of the week, the main indexes will show little direction on the dearth of market-moving cues, Daiwa's Hashizume said.

Uniqlo-brand owner Fast Retailing 9983.T edged 0.23% lower.

Mitsui Kinzoku, a maker of materials for lithium-ion batteries, tanked 17% after its revised annual net profit forecast failed to meet market expectations.

TOKYO, Aug 10 (Reuters) - Japan's Nikkei share average rose on Monday, following up on AI and chip-linked stocks' gains on Wall Street, with uncertainties surrounding the Middle East conflict capping gains.

The Nikkei .N225 was up 2% at 66,927.61 as of 0126 GMT and the broader Topix .TOPX edged up 0.44% to 4,092.93.

"Gains of chip-related stocks supported the Nikkei. Easing bets for the U.S. Federal Reserve's rate hike were the driver," said Daisuke Hashizume, senior strategist at Daiwa Securities.

U.S. stocks advanced on Friday, with the S&P closing at a record high to cap off a strong week of gains for the major indexes, after data showed the U.S. economy unexpectedly shed jobs last month and dampened expectations the Fed would raise interest rates at its September meeting. .N

In the Middle East, uncertainty continued over the reopening of the Strait of Hormuz as Iran said a deal with Oman defining new shipping lanes was in its final stages, but the U.S. must still meet other conditions.