Nikkei 225 Forecast: Oil Price Drop Fuels Record Rally Toward 67,000

Oil prices dropped on Monday on the news of the reopening of the Strait of Hormuz. This news fueled a rally in Japanese stocks that pushed the Nikkei 225 to 65,000 for the first time. The news reduced fears of a severe energy shock that boosted Japanese stocks. The economy of Japan depends on imported energy. A drop in oil prices helps alleviate inflationary pressure and reduces business expenses and consumer spending.

The risk appetite received a boost from the decline in crude oil. WTI oil fell to $92 a barrel and Brent oil fell below $100. This was significant to Japan because the high price of oil could adversely affect the profit margins for manufacturers, exporters, transport companies and companies involved in consumer services. Higher energy costs would also put a strain on the Bank of Japan to tighten policy rapidly. This is what encouraged investors to come back to growth and tech stocks.

The Nikkei 225 rally is also supported by the US stock market surge on the AI boom. The Dow Jones Index has reached a new high, and the S&P 500 and the Nasdaq show a positive structure to keep the bullish momentum.

Japanese Stocks Rally as Lower Oil Prices Boost Nikkei 225

The chart below shows that the Nikkei 225 has been inversely correlated to oil prices since the U.S.-Iran war. Any correction in oil prices has triggered a strong rally in Japanese stocks each time. Now, oil prices are dropping on Monday which has pushed the Nikkei 225 above 63,800 and initiated a rally towards the target of 67,000.

This rally is supported by the broader rally in Japanese stocks. Renesas Electronics Corporation has formed a bottom at 3,400 at the neckline of the cup pattern and triggered a strong surge towards 4,400.

On the other hand, NTN Corporation has also formed a bottom at the support of the black trend line at 380, and now the price is turning higher by forming a V-shaped recovery. This support indicates further upside during the next few days.

On the other hand, TDK Corporation has formed a bottom and continued a record rally.

Trent Limited also shows a strong positive structure, which looks ready to break higher. A break above the 4,500 level will further push Trent Corporation to much higher levels.

Similar strength is also observed in SoftBank Group, which shows that the price has formed a bottom at the 5,000 level and broken the 6,800 level. This breakout suggests a quick move towards the 8,000 level.

Nikkei 225 Breakout Signals More Upside Toward 67,000

From technical perspective, the Nikkei 225 has formed a cup pattern above 50,000. Then, after compressing between the 58,000 and 60,000 levels, the Nikkei 225 broke higher.

The recent correction to about 60,000 was considered a strong buying opportunity in major Japanese stocks as discussed in the previous article. Now, the index has broken the 63,800 level after forming another V-shaped recovery pattern. This breakout indicates a quick move towards 67,000.

However, a breakout above 67,000 will fuel another rally to much higher. The Nikkei 225 will likely offer a correction around the 67,000 level to fuel the next buying opportunity in Japanese stocks.

The daily chart for the Nikkei 225 also shows very constructive price action above the 60,000 level. This price action is seen as the bullish hammer candle, which was formed on 20 May 2026. After forming the bullish hammer candle, the breakout above 63,800 signals strong momentum in the next few sessions.

The target of 67,000 is seen in the daily chart below which shows that the index is trading in a strong uptrend. The ascending channel pattern forms this uptrend.

In Closing

The Nikkei 225 continues to be bolstered by a decline in oil prices, rising global sentiment and the general upward trend in Japanese markets. The Strait of Hormuz reopening has helped lift the energy shock concerns and eased investors’ nerves toward growth, tech and export heavy names.

The breakout above 63,800 suggests strong bullish momentum. The formation of a cup pattern above 50,000 and then V-shaped recovery above 60,000 suggests continued upside. The bullish hammer candle above 60,000 further supports bullish sentiment toward 67,000. A correction from 67,000 will likely offer another surge in the Nikkei 225. The short term trend remains bullish as long as the index holds 60,000.

Read more: Japan Stocks Eye 67,000 as Inflation Cools