One of the most important relations that Islam gives great care and concern for is the relationship of lineage and kinship. The Prophet (peace and blessings be upon him) said: “Whoever would like his provision to be increased and his lifespan to be extended let him uphold the ties of kinship.” (Muslim)

Thus, treating nephews gently and lovingly is something that is recommended in Islam. There is also nothing wrong if one kisses and touch them as they are mahrams (husband or close male relative forbidden in marriage).

The prominent Muslim scholar, Sheikh Muhammad Iqbal Nadvi, director and imam of Al-Falah Islamic Center, Oakville, Ontario, Canada, states: This is purely a mahram relationship. Allah says in verse 23 of Surat An-Nisaa’ which reads,

(Forbidden unto you are your mothers, and your daughters, and your sisters, and your father’s sisters, and your mother’s sisters, and your brother’s daughters and your sister’s daughters, and your foster-mothers, and your foster-sisters, and your mothers-in-law, and your step-daughters who are under your protection (born) of your women unto whom ye have gone in – but if ye have not gone in unto them, then it is no sin for you (to marry their daughters) – and the wives of your sons who (spring) from your own loins. And (it is forbidden unto you) that ye should have two sisters together, except what hath already happened (of that nature) in the past. Lo! Allah is ever Forgiving, Merciful.)
Touching a nephew is simply like touching your own child from both the cultural as well as the Islamic perspective.