Removable wallpaper will hide it. Put in Google search box: removable wallpaper - and see all the ideas!

Fabric to hide it. You could even use tension rods between the 2 cupboards, and no need to make any holes in the wall.

In one apartment, I wallpapered a big piece of plywood and tacked it up against an ugly wall I wanted to hide. You could try that with the whole space behind your bed and just let the strange niche be a void behind the faux wall.

Or mount some floating shelves in the niche and decorate.

A tension rod like this one should fit between the 2 cabinets.

Most home decorating fabric is 54" wide and to me it looks as if your bed is a double which is 54" wide. So one width of the fabric is perfect if it is something like a drapery fabric and you do it like the striped example I showed above.

If you don't sew, you can buy iron-down tape to turn the edges under, and to make the pocket for the top. Or even just cut off the edges even with the pattern, and use pins or staples to make the pocket. Especially if you use a patterned fabric, the focus will be on the pattern and not the details.

Easy peasy, inexpensive and no holes in the walls.

Thank you all so much for your responses, super helpful and some great ideas!

My bed is actually a queen so there is about 62 inches between the cabinets. so plenty of space to hang something nice. :)

you could do some sconces and a nice shelf (no shelf here, but you could add one)

floating shelf behind some 'headboard' pillows.

you can also span the gap w/some other cabinets

Paint the portion above the bed a darker color and add art

wall paper

ignore the books

Not a Pro.

So hard to see on the screen but I do see what your saying. I would add wood shelves to the niche side and art to the bump out behind the bed. That should even out the back wall.