IHSG Weakens Amid Hawkish Fed Expectations Over US-Iran Conflict
Jakarta (ANTARA) — Indonesia’s Composite Stock Index (IHSG) on the Indonesia Stock Exchange (IDX) moved weakly on Friday morning as market participants anticipated that the US Federal Reserve would adopt a hawkish stance due to risks of global energy inflation stemming from the conflict between the United States and Iran.
The IHSG opened weaker by 23.30 points or 0.32 per cent to 7,338.82. Meanwhile, the blue-chip LQ45 index fell 2.74 points or 0.36 per cent to 748.45.
“As Kiwoom Research predicted, the IHSG is finding it difficult to rise significantly given all the global sentiment that is occurring, especially as the long Eid al-Fitr holiday approaches, which is causing many investors to reduce their portfolio positions to avoid market volatility whilst away on holiday,” said Liza Camelia Suryanata, Head of Research at Kiwoom Securities Indonesia, in her analysis in Jakarta on Friday.
From abroad, the International Energy Agency (IEA) stated that the conflict between the US and Iran could become the largest energy supply disruption in history.
Oil flows through the Strait of Hormuz have plummeted drastically from approximately 20 million barrels per day before the conflict to nearly halting, forcing Gulf producing nations to cut production by approximately 10 million barrels per day.
Globally, oil supply is estimated to decline by approximately 8 million barrels per day in March 2026. The IEA has responded by releasing approximately 400 million barrels from strategic reserves, whilst the US plans to release approximately 172 million barrels from its emergency reserves.
On the other hand, Iran has warned that oil prices could reach 200 dollars per barrel if the conflict escalates. Nevertheless, Iran has been shipping approximately 11.7-12 million barrels of oil through the Strait of Hormuz to China since the war began on 28 February 2026.
West Texas Intermediate (WTI) crude oil was trading at 95.54 dollars per barrel, whilst Brent crude was at 100.41 dollars per barrel, according to trading data at 09.07 WIB today.
The subsequent domino effect is that the surge in oil prices will increase the risk of global stagflation and suppress expectations for monetary easing globally.
Previously, market participants expected 2-3 interest rate cuts from the Fed this year, but now they are pricing in only approximately 20 basis points of easing by year-end.
US President Donald Trump has again urged Federal Reserve Chairman Jerome Powell to lower interest rates promptly, however the market believes that the surge in energy prices will instead prolong inflationary pressures.
Nearest, the Fed will hold its Federal Open Market Committee (FOMC) meeting on 17-18 March 2026 to determine its benchmark interest rate policy.
Domestically, the government has begun withdrawing a portion of Bank Indonesia’s (BI) surplus to state coffers to help finance the state budget amid rising budgetary needs, with approximately 16 trillion rupiahs reported to have been withdrawn based on the authority in Finance Ministry Regulation No. 115/2025.
Finance Minister Purbaya Yudhi Sadewa emphasised that the withdrawal is not being carried out entirely and remains coordinated between the government and BI to maintain balance between fiscal and monetary policy and financial system stability.
However, this move is viewed as potentially causing investor concern due to the risk of being perceived as intervention in the central bank and reflecting mounting fiscal pressures.
In trading on Thursday (12/03), European stock exchanges closed broadly lower, including Euro Stoxx 50 down 0.69 per cent, the British FTSE 100 index down 0.47 per cent, the German DAX index down 0.21 per cent, and the French CAC 40 index down 0.71 per cent.
Wall Street also closed broadly lower on Thursday (12/03), including the Dow Jones Industrial Average down 739.42 points or 1.56 per cent to 46,677.85, the S&P 500 falling 1.52 per cent to 6,672.77, and the Nasdaq Composite declining 1.78 per cent to 22,311.98.
Asian regional stock exchanges this morning showed mixed performance, including the Nikkei index down 551.00 points or 1.01 per cent to 53,902.00, the Shanghai index down 4.47 points or 0.11 per cent to 4,124.62, the Hang Seng index down 85.84 points or 0.33 per cent to 25,630.91, and the Straits Times index up 0.58 points or 0.01 per cent to 4,855.92.