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

Author: Muhammad Umair

Published: April 14, 2026

Key Points

• The Nikkei 225 index rebounded strongly after an initial drop, demonstrating resilience amid rising geopolitical tensions in the Strait of Hormuz.
• Elevated oil prices are contributing to inflation in Japan, which is pressuring corporate margins and investor sentiment.
• The technical outlook for the Nikkei 225 remains bullish, with key breakouts indicating potential upside towards higher levels.

Market Overview

The Nikkei 225 had a challenging start to the week following the announcement of no ceasefire between the United States and Iran. However, the index surged past 57,000 after this initial decline. The volatility in global stock markets, driven by geopolitical tensions in the Persian Gulf, has created significant uncertainty. The U.S. blockade of the Strait of Hormuz could lead to further market fluctuations. Despite this, the Nikkei 225 has shown considerable strength and remains in a positive trend.

Energy Costs and Inflation

The fluctuations in energy markets are the primary drivers of the significant movements in the Nikkei 225. Both Brent and WTI oil prices are trading above $90 per barrel. As Japan is a major energy importer, rising energy prices could lead to increased costs for businesses, potentially eroding profit margins and negatively impacting investor confidence. Recent inflation data indicates that Japan's producer price index (PPI) rose by 0.8% in March, marking the largest monthly gain since November 2022, with a year-over-year increase of 2.6%.

Technical Outlook

From a technical standpoint, the Nikkei 225 remains strongly bullish despite the recent correction. The index has recovered above the 56,000 level and is consolidating, looking for further upside. A breakout above 57,300 could signal a move towards 60,000, with a further break above this level indicating a potential rally to 65,000. The Relative Strength Index (RSI) remains above the mid-level, suggesting a positive short-term outlook.

Support Levels

The 4-hour chart indicates strong support around the 54,300 and 55,600 levels. Any corrections towards these levels may present strong buying opportunities for the next upward move. The long-term support remains between 46,000 and 50,000, which could serve as an accumulation zone for long-term investors.

Conclusion

Despite the ongoing global energy crisis, the Nikkei 225 remains strongly bullish. The initial decline on Monday highlighted the market's sensitivity to geopolitical news, but the subsequent recovery indicates that buyers are confident at critical levels. However, rising oil prices pose a significant challenge for Japan, driving inflation and reducing corporate profit margins, which could undermine the overall equity outlook. The technical structure suggests a strong rally towards 60,000 in the near term, with a break above this level indicating further upside potential.