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

rose on Thursday, led by SoftBank following a surge in its

chip-unit shares, as cautious optimism grew that tensions in the

Middle East could ease.

The Nikkei was up 0.61% at 54,075.00, as of 0137

GMT, and on track for a three-session rally, if the momentum

persists.

The broader Topix gained 0.21% to 3,658.35.

"The market expectations for the early end of the war are

not as strong as the Nikkei's gains in the past several sessions

are limited," said Shuji Hosoi, senior strategist at Daiwa

Securities.

"The index trades still below the 25-day average of 55,300.

That signals the market remains cautious over the fate of the

war," he said.

Wall Street's main indexes closed higher on Wednesday as oil

prices fell while Iran reviewed a U.S. proposal to end the

Middle East conflict, feeding investor hopes for a de-escalation

in the fourth week of a war that has disrupted global energy

flows and stoked inflation concerns.

SoftBank Group surged 6.2% after shares of Arm

Holdings jumped 20% overnight, following the SoftBank-controlled

company's forecast that its new data-centre chip could generate

billions of dollars in annual revenue.

Other artificial intelligence-related shares climbed, with

fibre optic cable makers Fujikura ( FKURF ) and Furukawa Electric ( FUWAF )

rising 8% and 5%, respectively.

Chip-testing equipment maker Advantest ( ADTTF ) dropped

nearly 1% to weigh on the Nikkei the most.

The mining and shipping sectors jumped

3.93% and 2.06%, respectively, to become the top-performing

sector, a sign that investors bet on the conflict will prolong,

said a strategist at a domestic firm.

Office equipment maker Ricoh ( RICOF ) fell 4.34% to become

the worst percentage loser in the Nikkei.

Of the more than 1,600 shares trading on the Tokyo Stock

Exchange's prime market, 57% stocks declined, 38% rose and 3%

traded flat.