Nikkei 225 Forecast: Record High Rally Builds on U.S.–Iran Deal Optimism

The Nikkei 225 index rose near a new record high as the global risk mood improved and investors responded to the developments of the geopolitical tensions. The index was boosted by the increased optimism of a possible U.S.-Iran deal while the global equity markets tracked Wall Street higher. This change contributed to strong rally in Asian markets, with Japan taking the lead.

Global Risk Sentiment Improves as U.S.–Iran Deal Hopes Rise

The underlying cause of the rally is optimism about the U.S.-Iran situation. The markets are responding to expectations that conflict will end in the near future. President Donald Trump mentioned on Truth Social that deal might be near. This boosted investor confidence. Equity markets are likely to gain as risk sentiment increases and the Nikkei 225 is reacting to this trend.

Meanwhile, international markets are further supporting this trend. The S&P 500 has regained all the losses after the US-Iran war and gained strong momentum this week. The Nasdaq Composite and Dow Jones Industrial Average also received strong gains.

Technology and Cyclical Stocks Lead Domestic Market Strength

The Nikkei 225 is not just rising due to external factors but also due to the strong performance of the sectors. The gains were led by technology and consumer cyclical stocks, which are an indication of investors’ positioning to grow. TDK Corporation and Trend Micro received strong gains this week which indicates a positive outlook on the Japanese technological industry. The chart below shows that both technology stocks have broken the key level which indicates further upside in the near future.

On the other hand, the semiconductor stocks are performing well. The chart below shows that Tokyo Electron Ltd. and Advantest Corp. have broken the record levels while Lasertec Corp. is on the verge of breaking its highs. This strong performance indicates that the Nikkei 225 is likely to remain strong in the near future.

Corporate developments were also a factor in this surge in Nikkei 225. Daikin Industries shot up after activist investor Elliott Investment Management pushed the company to improve performance. This pressure tends to result in improved capital allocation and higher shareholder returns, which will attract more investors.

China’s Strong Growth Supports Japan’s Export Outlook

The macro side is also favorable, with better economic results in China. The Chinese economy grew faster than anticipated. The chart below shows that the China GDP grew 1.3% in Q1 2026 following 1.2% increase in Q4 2025. This growth is supported by continued policy backing from Beijing.

This growth is important to Japan since China is a significant trading partner. Stable growth prospects in China will favour demand for Japanese exports. Hence this will enhance the earnings perspectives of companies in the Nikkei 225.

In general, the index is in a good uptrend due to the global risk appetite, domestic strength and the improving growth conditions in the region.

Nikkei 225 Breakout Keeps Bullish Trend Intact

From a technical perspective, the long-term outlook for Nikkei 225 remains strongly bullish, as the price has broken the March 2026 highs and reached near the record level of 60,000. A confirmed breakout above the 60,000 level will open the door for another surge in Nikkei 225. Based on the recent technical developments, it is likely that the Nikkei 225 will continue higher.

The monthly chart highlights the formation of an ascending broadening pattern, which was broken in September 2025. Despite this strong rally, the RSI remains overbought, but the momentum remains strong.

The daily chart of Nikkei 225 further confirms this bullish development, as discussed in the previous article. The formation of a V-shaped pattern indicates a strong recovery from the ground.

The 4-hour chart for Nikkei 225 also shows a rounding bottom formation above the 200-day SMA. A correction back towards the 55,000 to 56,000 will be considered as a buying opportunity for the index to rally to 65,000.

The correction back towards the 55,000 to 56,000 remains a strong short-term support.

Bottom Line

The Nikkei 225 is in a healthy uptrend with global risk mood improving and domestic forces still favoring the market. Positive news of a possible U.S.Iran agreement, robustness in global equities and positive growth in China are all contributing to the positive trend in the index. Meanwhile, the performance of the sector and corporate developments are becoming attractive to investors.

From technical perspective, the index remains in a bullish trend and a breakout above 60,000 will open the door for a rally to 65,000. On the other hand, a correction back to 55,000 to 56,000 will be a strong support.