IHSG Weakens Amid Tight Monetary Policy Expectations From US-Iran Conflict
Jakarta — Indonesia’s Composite Share Price Index (IHSG) on the Indonesia Stock Exchange (IDX) moved lower on Monday as markets anticipate the implementation of tight monetary policy resulting from escalating conflict between the United States and Iran.
The IHSG opened lower by 21.76 points or 0.30 per cent to 7,115.45. Meanwhile, the blue-chip LQ45 index fell 3.38 points or 0.46 per cent to 724.95.
“Kiwoom Research still recommends maintaining a wait-and-see stance and holding more cash to anticipate global volatility whilst the IDX is not operating (Eid recess),” said Liza Camelia Suryanata, head of research at Kiwoom Securities Indonesia, in her analysis in Jakarta on Monday.
Internationally, market participants’ focus this week is on The Federal Reserve’s FOMC meeting on 17-18 March 2026, which will release updated economic projections and signal the direction of interest rates amid surging energy prices caused by Middle Eastern conflict.
Rising energy prices are beginning to shift global monetary policy expectations, with markets now estimating fewer than one Federal Reserve rate cut through the end of the year, down from expectations of two rate cuts before the war erupted.
Additionally, US economic data shows a combination of slowing growth and persistently high inflation. US GDP in the fourth quarter of 2025 was revised downwards to 0.7 per cent, whilst core PCE in January rose 3.1 per cent, far above the Federal Reserve’s 2 per cent inflation target.
“This condition increases the risk that central banks will maintain high interest rates for longer,” said Liza.
On another front, market participants continue to monitor developments in the war between Iran and the United States, including the potential for further attacks on energy facilities and efforts to reopen shipping lanes through the Strait of Hormuz.
Attention is also focused on the possibility of Israel-Lebanon ceasefire discussions involving Hezbollah.
Meanwhile, US-China economic relations are under scrutiny through discussions on Board of Trade and Board of Investment mechanisms ahead of the planned meeting between US President Donald Trump and China’s President Xi Jinping.
US and Chinese economic officials held talks in Paris discussing increased trade in agriculture, energy, and critical minerals sectors ahead of the planned Trump-Xi meeting at the end of March 2026.
US allies in the Asia-Pacific region agreed on energy investments totalling approximately $57 billion through 22 agreements with US companies at the Indo-Pacific Energy Security Forum in Tokyo.
These agreements reflect US efforts to strengthen energy security for its allies and increase global supply amid supply disruptions caused by the Iran war and the Strait of Hormuz closure. Japan also expressed interest in increasing purchases of US oil.
Domestically, the government confirmed that the Agreement on Reciprocal Trade (ART) with the United States remains the foundation of bilateral trade relations amid ongoing trade investigations in the US, described as part of the internal administrative legal mechanism.
The government will follow the process whilst continuing to communicate with US authorities and proceed with the domestic implementation of the ART, including consultations with parliament and ratification procedures.
In Friday trading (13 March 2026), European stock exchanges declined across the board, including the Euro Stoxx 50 falling 0.56 per cent, the UK FTSE 100 index declining 0.42 per cent, Germany’s DAX index falling 0.60 per cent, and France’s CAC index falling 0.91 per cent.
US stock exchanges on Wall Street also declined uniformly in Friday trading (13 March 2026), with the S&P 500 index falling 0.6 per cent to 6,632, the Nasdaq index dropping 0.9 per cent to 22,105, and the Dow Jones index falling 0.3 per cent to 46,559.
Regional Asian stock exchanges this morning included the Nikkei index falling 705.00 points or 1.31 per cent to 53,114.60, the Shanghai index falling 38.75 points or 0.95 per cent to 4,056.70, the Hang Seng index gaining 61.34 points or 0.24 per cent to 25,256.94, and the Straits Times index gaining 1.34 points or 0.03 per cent to 4,843.70.