SynopsisJapan's Nikkei index surged past 70,000 for the first time as the Bank of Japan raised its short-term policy rate to 1%, the highest in 31 years. The central bank's gradual tightening, coupled with diminished Middle East conflict risks, supported equities. Simultaneously, an Iran-US peace deal boosted sentiment, leading to gains in India's Sensex and Nifty.ReutersWhile stock market investors typically fear rate hikes, Japan's Nikkei seemed to cherish it as the benchmark index crossed 70,000 for the first time even as the country's central bank, Bank of Japan, raised its interest rates to the highest levels seen in 31 years.The Bank of Japan (BOJ) decided to raise its short-term policy rate to 1% from 0.75%, taking borrowing costs to levels not seen since 1995. This marks the first rate hike announced by the Japanese central bank since December, in line with expectations.Deputy Governor Shinichi Uchida welcomed the recent US-Iran peace deal but noted persistent inflationary risks. "Compared with ⁠the previous meeting, the risk of a sharp deterioration in the economy has diminished. On the other hand, price rises are broadening and there is a risk underlying inflation may deviate from our target," Uchida said in a news conference he held on behalf of Governor Kazuo Ueda, who missed the meeting for medical treatment.Immediately after the announcement, Nikkei 225 jumped as much as 1% to hit a fresh lifetime high above 70,000. Japanese government bonds slid, while the yen maintained a slightly stronger tone against the dollar.Why Nikkei rallied after BOJ's rate hike?"The BOJ delivered what markets expected…But the reaction shows this was not hawkish enough to force a major yen repricing,” Reuters quoted Charu Chanana, chief investment strategist at Saxo, as saying. The central bank "is still moving in a very gradual way and continues to say financial conditions will remain accommodative…This is mildly supportive for Japanese equities because the BOJ is tightening, but not in a way that threatens liquidity or earnings,” she added.BOJ saying that growth risks from the Middle East conflict have diminished may have also boosted investor sentiment in its stock market. Of Nikkei's 225 components, 67 rose while 157 fell, with ‌one trading flat. Chip-testing machinery makers outperformed, with Advantest gaining 3.6%, as did data centre plays, with Fujikura and Furukawa Electric up 8.6% and 4.2%, ⁠respectively.Also Read | Behind India's Rs 5.5 lakh crore FII selloff lies a hidden list of 84 multibagger winnersSensex and Nifty also gained as Iran and US agreeing to the peace deal framework boosted investor sentiment. US President Donald Trump announced on Sunday that the much-awaited agreement has been finalised. "The Deal with the Islamic Republic of Iran is now complete," Trump wrote on his Truth Social platform. He further said that the Strait of Hormuz, a vital route for global oil shipments that Iran has effectively closed for months, would reopen on Friday, while the US would end its blockade of Iranian ports. "Ships of the World, start your engines. Let the oil flow!" Trump wrote. Iran meanwhile said that the newly announced agreement with the United States puts an "immediate end" to the countries' war. "A permanent and immediate end to the war has been declared on all fronts, including Lebanon," Iran's Deputy Foreign Minister Kazem Gharibabadi said in televised comments in the early hours of Monday.Also Read | $320 billion danger! Jefferies warns 70 large EM funds are underweight India(With inputs from agencies)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless(You can now subscribe to our ETMarkets WhatsApp channel)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless