Nikkei 225 Forecast: Will the Rally Extend as Oil Prices and Hormuz Risks Rise?

Nikkei 225 had a poor start to the week after it was announced there would be no ceasefire between the United States and Iran. However index surged after poor start and pushed above 57,000.

The volatility in global stock markets due to rising geopolitical tensions around the Persian Gulf has created great uncertainty about what will happen next. Moreover United States blockade of the Strait of Hormuz could lead to even greater volatility. Despite this uncertainty, the index has shown significant strength and remains in positive trend.

Energy Costs and Inflation Become Key Market Drivers

The volatility in energy markets is the main driver of the big swings in the Nikkei 225. Both Brent Oil (BCO) and WTI Oil (CL) are trading above $90.00 per barrel. With the current energy situation affecting Japan as major energy importer, if energy prices continue to rise, businesses will bear the costs. As those costs rise, they can erode profit margins and negatively affect investor confidence.

The chart below suggests that recent inflation data is beginning to reflect the impact of high energy prices. Japan’s producer price index increased 0.8% in March, from 0.1% in February. That is the biggest monthly gain since November 2022.

Japan’s producer prices were up 2.6% year-over-year in March 2026 which is the largest yearly gain since November. Growth in the transportation equipment, production machinery and information and communication categories has contributed to this inflation.

Nikkei 225 Technical Outlook: Bullish Structure Remains Intact

From a technical perspective, the Nikkei 225 remains strongly bullish despite the correction on Monday. The Nikkei 225 has recovered above the 56,000 level and is consolidating above this level to look for further upside. The chart below shows that the index has broken the 57,300 after consolidation which indicates a move to 60,000. On the other hand, a break above 60,000 will indicate a strong rally to 65,000.

The RSI remains above the mid-level, which indicates a positive short term outlook for the Nikkei 225. Moreover, the index has recovered within the ascending channel which indicate continued rally in the short term.

The 4-hour chart also shows strong price development from the bottom of the 50,000 level. The chart shows strong support around the 54,300 and 55,600 levels. Any correction back towards these levels will be considered a strong buying opportunity for the next move higher. The strong uncertainty in the Persian Gulf indicates strong consolidation and high volatility in the short term.

Despite strong consolidation and a constructive pattern, the long-term price action shows it has recovered most of the March losses in April 2026. This suggests that if the index breaks above the February 2026 highs, it will signal a strong surge in the index.

However, the ongoing energy crisis and its impact on stocks will likely create strong uncertainty. As long as the price remains below the 60,000 level, the Nikkei 225 can consolidate further.

The strong long-term support remains between the 46,000 and 50,000 levels, which provides an accumulation zone for long term investors.

Bottom Line

Nikkei 225 remains strongly bullish despite the global energy crisis. The initial decline on Monday was an indication that the market is highly sensitive to geopolitical news. The recovery indicates that buyers remain confident in the structure at important levels.

But the increasing oil prices are critical issue for Japan. The higher energy prices drive inflation and reduce the profit margins for Japanese companies. This undermines the general perspective of equities. Simultaneously, any uncertainty regarding the Strait of Hormuz continues to keep the sentiment of risk. Despite this risk, the technical structure indicates a strong rally in the next few sessions to 60,000. A break above 60,000 will indicate further upside to 65,000.