The Nikkei 225 index in Japan climbed more than 2% on Monday, reaching its highest closing level in almost four weeks. The rally was driven by gains in artificial intelligence and chip-related stocks, following a rebound on Wall Street on Friday, though concerns over the situation in the Middle East tempered the overall advance.

The Nikkei 225 rose 2.08% to close at 66,970.22 points, its highest finish since July 15. The broader Topix index increased by 0.63%, ending at 4,100.61 points. Daisuke Hashizume, a senior strategist at Daiwa Securities, commented, "The rise in chip-related stocks supported the Nikkei. The easing of expectations for a Federal Reserve interest rate hike was the driving factor."

U.S. stocks advanced on Friday, with the S&P 500 closing at a record high, capping a strong week for major indices. This followed data showing that the U.S. economy unexpectedly shed jobs last month, which dampened market expectations for a rate hike by the Fed at its September meeting. In the Middle East, uncertainty persists over the reopening of the Strait of Hormuz. Iran stated that an agreement with Oman to demarcate a new shipping channel is in its final stages, but other conditions from the United States remain to be met.

Chip-related firms Advantest Corp and Tokyo Electron Ltd rose by 6.43% and 4.13%, respectively. Furukawa Electric Co Ltd surged 7.62%, extending its strong run from Friday after the fiber-optic cable manufacturer raised its annual net profit forecast. Ibiden Co Ltd, a supplier to AI bellwether Nvidia, gained 4.03%. Recruit Holdings Co Ltd skyrocketed 22.79%, hitting the daily limit high of 16,165 yen, after the human resources services company raised its annual forecast, exceeding market expectations.

Daiwa Securities' Hashizume noted that with Japan in the Obon holiday period, investors are avoiding active trading, and with the weekend approaching, the major index is likely to lack direction amid a dearth of market catalysts. Fast Retailing Co Ltd, the owner of the Uniqlo brand, declined 0.74%. Mitsui Mining & Smelting Co Ltd, a manufacturer of lithium-ion battery materials, saw its shares plunge 13.55% after its revised annual net profit forecast fell short of market expectations.