Indonesian Markets Tumble as Iran Tensions Spark Risk-Off Surge

Indonesian financial markets reacted sharply to the intensifying conflict between Iran and regional actors, triggering a risk-off selloff across emerging markets. The Jakarta Composite Index (IDX) closed down 4.3% at 7,312.12, marking its steepest daily drop since late 2023. The rupiah weakened to 16,120 per U.S. dollar, a 2.8% decline from the previous session, pressured by capital outflows and rising safe-haven demand. The turmoil reflects broader market concerns over potential disruptions to global energy supplies. Crude oil futures (CL=F) surged 6.9% to $98.40 per barrel, driven by fears of supply chain interruptions in the Strait of Hormuz. This spike elevated inflation expectations and increased pressure on commodity-sensitive emerging market currencies, including the rupiah. The volatility index (^VIX) climbed to 27.4, its highest level in over a year, signaling intensified investor anxiety. Market participants are reassessing exposure to risk assets, particularly in Southeast Asia, where energy and defense sectors are sensitive to geopolitical shocks. Foreign portfolio investors pulled $187 million from Indonesian equities in the past three days, accelerating the sell-off. Regional investors are monitoring developments in the Middle East closely, with analysts warning that further escalation could trigger deeper sell-offs in ASEAN markets and fuel inflation pressures in import-dependent economies like Indonesia.