I can definitely change the diagonal wall color. The capers is white, gray, and sprinkle of brown.

What color do you recommend?

I think a blue-grey could be a good choice if you select a color that is blue enough to pop the fireplace but goes well with your wall color including has about the same color intensity. Just judging on my screen I would get samples of SW Tradewind, SW Topsail, BM Adagio.

If you want to go another direction you could try SW Champagne or BM Apricot Beige.

To add color and interest I would suggest a tapestry.. Those are hard to find and expensive. So, in lieu of that I might suggest hanging a rug in the space above the fireplace. A classic oriental rug might be very interesting in the space. That suggestion is a bit unconventional but your fireplace and wall are already unconventional.

I have a two story living room with a fireplace. The room even has a railing on the second floor like your room does, although mine isn't right next to the fireplace wall. I have a picture that is 36" X 48" tall above the fireplace. I think the niche over the fireplace should be the same as the wall color. You don't need to be emphasizing the vertical aspect with a contrasting color. I think a room is more welcoming if it is human scaled, so IMO there isn't a need to decorate the whole height of the wall unless you like a dramatic effect. If so, the tapestry idea could be stunning.

Tall skyscape! Better yet, a skyscape mural done by local artist.

Cool Water 1 Artwork · More Info

Select something that fits the opening better.

I agree with @kandrewspa that using the same wall color on the inset area will help place artwork there. Something that fills about 1/2 to maximum 3/4 of the vertical space will be enough. It’s a very long thin area - you don’t want to emphasize the indentation. Too

Ours was similar. I painted space one shade darker than the walls from color swatch strip then added an extra large framed painting. It didn't quite fill the space but the surrounding darker paint border/framed it. I would have initially had a big mirror installed but it would have been reflecting a ceiling fan and pole :o(

I would enlarge a vertical outdoor photo with the exact dimensions of the insert above the fireplace. Perhaps, a closeup of an interesting, tall building.

On a flip we did sev years ago

What a beautiful fireplace. Very classical, almost austere. I wouldn’t go with sketchy or noisy pieces as BeverlyFLA pictures, as that would kill the mood. Can you spring for a commissioned piece? If so visit a space that has many artists studios (like Torpedo Factory in Alexandria, Va) and do-create something that will work for your space.