Hit by the Iran War and Fitch Sentiment, Can the IHSGS Stage a Recovery?
In the sovereign bond market, the yield on 10-year government securities rose to 6.64% yesterday from 6.55% on Tuesday, signalling investor selling that pushed prices lower and yields higher.
From the United States stock market, Wall Street finally recovered on Wednesday, or in the early hours of Thursday in Jakarta time. Stocks rose after oil prices cooled following developments in the US-Israel war against Iran and easing concerns about a slowdown in US economic growth. The Dow Jones Industrial Average rose 238.14 points, or 0.49%, to close at 48,739.41, halting a three-day losing streak. The S&P 500 gained 0.78% to 6,869.50, and the Nasdaq Composite jumped 1.29% to 22,807.48.
Tech stocks supported the rally, with Micron Technology and Advanced Micro Devices each up around 6%. Broadcom and Nvidia rose about 2%. In oil markets, Brent crude and West Texas Intermediate (WTI) futures traded flat, with both contracts closing well below their intraday highs on Tuesday.
A number of strong economic data releases boosted investor sentiment on Wednesday. First, the ADP report showed private-sector employers added more jobs than expected in February. Additionally, the US non-manufacturing sector posted stronger growth than expected last month, with inflationary pressures easing.
“Concerns about the labour market softening, or even deteriorating, are now being questioned,” said Anthony Saglimbene, head of market strategy at Ameriprise, to CNBC.
Positive reaction to the data came as oil prices cooled after US Treasury Secretary Scott Bessent said the US would issue a series of announcements to support the smooth flow of oil through the Persian Gulf. Brent and WTI briefly moved into negative territory for the first time since the war began, and they ended well below Tuesday’s session highs.
Oil-price relief also followed President Donald Trump’s Tuesday remark that the US would provide insurance against risk for all maritime trade crossing the Persian Gulf to encourage tankers to resume transits through the Hormuz Strait. Tanker traffic through the strait had paused after the commander of the Islamic Revolutionary Guard Corps threatened to burn ships attempting to pass.
“If the Middle East situation becomes more disruptive, you will see further larger impacts on global markets and asset prices, perhaps even on growth prospects,” Saglimbene said. However, he added that it is still too early to make that assessment.
Meanwhile, the 15% global tariff announced by Trump at the end of last month will begin to be implemented this week, according to Bessent on Wednesday. However, he forecast that the tariff would revert to pre-decision levels within around five months, following a Supreme Court ruling that voided the policy.
Indonesia’s financial markets were expected to recover today amid continued external pressures. Developments in Iran and news about ratings could weigh on domestic markets, but Wall Street’s rebound and a softer dollar index are expected to ease the pressure.
Fitch Cuts RI Outlook to Negative, BI Reaffirms Fundamentals Remain Solid
Fitch Ratings, the global rating agency, trimmed Indonesia’s outlook from stable to negative. However, the long-term foreign-currency rating remains at BBB, or investment grade. The move signals increased mid-term risk, though Indonesia’s investment-grade status remains intact.
Fitch said the revision was driven by rising policy uncertainty and concerns about the consistency and credibility of the policy mix, especially amid centralised decision-making.
The target for 8% growth envisioned by the Prabowo Subianto administration is seen as potentially encouraging more expansionary fiscal and monetary policy.
Plans to revise the State Finance Law to widen the deficit cap to 3% of GDP are also a focus. Fitch estimates the 2026 budget deficit at around 2.9% of GDP.
Social spending, including the free nutritious meals programme (MBG), is projected to absorb around 1.3% of GDP across 2025-2029. Conversely, the government revenue-to-GDP ratio is expected to remain modest at around 13.3% in 2026-2027. The establishment of Danantara with large investment plans for downstream projects is seen as a growth opportunity, but remains uncertain if its mandate extends to quasi-fiscal activities.
Externally, the current account deficit is projected to widen to about 0.8% of GDP in 2026 due to weaker net exports. Fitch also notes that Indonesia’s governance indicators sit below the BBB median.
Nevertheless, the agency still sees supports such as projected growth around 5% and a government debt ratio around 41% of GDP, still below the median for BBB-rated peers. Previously, Moody’s also downgraded Indonesia’s outlook to negative in February 2026.
In response, Bank Indonesia emphasised that the national economy’s fundamentals remain solid. Governor Perry Warjiyo said the change in outlook does not reflect a weakening of the economy, noting domestic growth remained resilient despite the prevailing uncertainties.