(Updates with closing prices)

By Rocky Swift

TOKYO, March 25 (Reuters) - Japan's Nikkei share average

rose the most in a week on Wednesday, supported by cautious

optimism that the Middle East crisis could move toward a

potential settlement after recent volatility.

The benchmark Nikkei 225 Index rose 2.87% to close

at 53,749.62, its biggest percentage gain since March 18. The

broader Topix climbed 2.57% to 3,650.99.

U.S. President Donald Trump said on Tuesday the U.S. was making

progress in its efforts to negotiate an end to the war with

Iran. Like many global markets, Japanese stocks have gyrated

amid conflicting signals about whether the crisis is escalating

or an off-ramp to hostilities.

Because of its dependence on imported energy, Japan's economy is

particularly vulnerable to the conflict's impact on oil

shipments and prices. The sharp decline in crude on Wednesday

appeared to be the trigger for a jump in the Nikkei, said Wataru

Akiyama, a strategist at Nomura Securities.

"Expectations for a lowering of tensions in the Middle East

appear to be driving the stock market higher," Akiyama said.

"However, the sense of uncertainty has not yet been completely

eliminated."

Japan's Nikkei 225 saw broad-based gains, with 203 advancers

against 22 decliners.

Leading the rally was Tokio Marine Holdings ( TKOMF ), which

surged 14.6% and climbed for a second consecutive session after

Berkshire Hathaway ( BRK/A ) disclosed it had acquired a stake in

the insurer.

It was followed by strong performances from Furukawa

Electric ( FUWAF ), which rose 11.2%, and SoftBank Group

, up 7.9%. Both companies have benefited from momentum

in artificial intelligence investments.

On the downside, Recruit Holdings ( RCRRF ) led decliners

with a 1.9% drop, followed by energy explorer Inpex

Corp ( IPXHF ), which shed 1.7%.