Nikkei index falls sharply from record highs as the oil crisis hits Japan hard. These are the key levels to watch

The Nikkei index has come under significant selling pressure as the escalating conflict in the Middle East continues to disrupt global oil supply. Japan is one of the most energy-dependent developed economies in the world, relying heavily on oil imports from the Middle East, and that vulnerability is now showing up clearly in price action.

The situation intensified after Iran’s new supreme leader, Mojtaba Khamenei, declared that the Strait of Hormuz should remain closed, while attacks on shipping vessels in the Persian Gulf have continued to escalate. In response, Japan announced it will release 80 million barrels from its strategic reserves as part of the IEA’s record 400 million barrel coordinated release. Despite those efforts, the Nikkei has reversed sharply from the record highs it set just two weeks ago. In our previous analysis on the Nikkei, we highlighted key Fibonacci retracement levels on the pullback from those highs, several of which have now been tested. Let’s look at where things stand on the charts.

Daily chart analysis

Nikkei index daily chart showing the break below the 50 EMA, the potential lower high forming, and the RSI bearish divergence from the previous top.

On the daily timeframe, the Nikkei has broken below the daily 50 EMA for the first time since reclaiming it back in May 2025 after the April tariff selloff. This moving average has acted as dynamic support throughout the entire uptrend, making this a notable development.

The rally has been built on a clean series of swing highs and swing lows since mid-2025, but there are now early signs of a potential shift in structure. The bearish retest of the daily 50 EMA appears to be forming what could be a lower high, which would mark the first structural break in this trend.

• RSI bearish divergence was present on the previous top, warning of weakening momentum before the reversal. Worth noting for any future rally attempts
• Price remains above the 200 daily SMA around 47,075, which suggests the long-term trend is still bullish. However, the medium-term picture is showing clear signs of distress and indecision
• A reclaim of the daily 50 EMA around 54,700 could signal renewed strength
• A break below 52,500 support could point to a deepening selloff, with the 200 SMA potentially coming into play as the next major downside target

4H chart analysis

Nikkei index 4-hour chart showing the descending channel, the 54,500 resistance zone, and the 52,500 support level.

The 54,500 resistance zone was a well-established range resistance hat contained price action between January and early February, before the breakout into record highs. The Nikkei now appears to be re-entering that same range from above, which suggests the market could spend some time consolidating within this area.

The 52,500 support zone sits at the lower boundary of that range and lines up with the level highlighted on the daily chart.

• A decisive break above 54,500 could signal renewed strength and a potential shift back in favour of buyers
• A break below 52,500 could point to more prolonged weakness for the Nikkei and the broader Japanese stock market

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