(Updates with closing prices)

By Junko Fujita

TOKYO, May 26 (Reuters) - Japan's Nikkei share average

fell on Tuesday, retreating from a record high in the previous

session, as investors locked in profits and rising oil prices

weighed on sentiment.

The Nikkei ended 0.25% lower at 64,996.09. The

index jumped 2.87% to close at 65,158.19 on Monday, driven by

AI-optimism bets. It gained 8.95% over the past three sessions

in its steepest three-day gain in more than six years.

The broader Topix inched 0.1% lower to end at

3,938.46 on Tuesday.

"The market has turned to the risk-on mode, but investors

sold stocks to book profits from the sharp rally," said Daisuke

Hashizume, senior strategist at Daiwa Securities.

"Optimism over a U.S.-Iran peace deal has already been

priced in, and gains in oil prices weighed on sentiment."

Iran's top negotiator and its foreign minister were in Doha for

talks with Qatar's prime minister on a potential deal with the

U.S. to end the three-month-old war, an official briefed on the

visit said on Monday, after Washington and Tehran played down

hopes for an imminent breakthrough.

Brent crude futures rose nearly 2% in Asian trade after the U.S.

military carried ​out strikes in Iran, keeping markets on edge

as a deal to end the war and open up the Strait of Hormuz

remained elusive.

In Japan, chip-related heavyweights fell, with Advantest ( ADTTF )

and Tokyo Electron ( TOELF ) down 6% and 1.46%,

respectively.

Memory maker Kioxia ( KXHCF ) slipped 4.57%, and fiber optic

cable maker Fujikura ( FKURF ) lost 3.98%.

Bucking the trend, SoftBank Group jumped 10.91% to

become the biggest support for the Nikkei.

Of all the shares traded on the Tokyo Stock Exchange's prime

market, 44% rose, and 52% fell, and 3% traded flat.