JCI and Rupiah Rally Threatened by Twin Storms from the US

From the United States (US) stock market, Wall Street closed uniformly weaker on Wednesday, or early Thursday Indonesian time, after American forces began launching additional strikes against several targets in Iran. The Dow Jones Industrial Average fell 953.33 points, or 1.87%, to 49,918.78. Meanwhile, the S&P 500 weakened 1.62% to 7,266.99 and the Nasdaq Composite plunged 1.98% to 25,169.50. The three main Wall Street indices fell after Trump vowed to launch additional strikes against Iran. He said, “We will hit them very, very hard.” In a post on Wednesday morning, Trump wrote that Iran has delayed negotiations for too long on a deal that would actually be very beneficial for them, and now they must pay the price. The United States began launching strikes on Iran on Wednesday, according to a statement from US Central Command (CENTCOM). In a post on platform X, CENTCOM stated the US military began “launching additional strikes in self-defence at 5:15 p.m. ET against several targets in Iran at the direction of the Commander-in-Chief.” The post confirmed the strikes were conducted “in response to Iran’s unprovoked and ongoing aggression.” Iranian state media reported that Iran has targeted US ships in the Strait of Hormuz with missile and drone attacks. Oil prices surged following the threat. West Texas Intermediate (WTI) crude oil futures rose 2.07% to close at US$90.03 per barrel, while Brent crude strengthened 1.8% to US$93.10 per barrel. Tensions in the Middle East escalated again on Tuesday night after US forces launched strikes against Iran in response to the downing of a US Army Apache helicopter on Monday, according to US Central Command. Previously, Trump accused Iran of shooting down the helicopter that was patrolling the Strait of Hormuz. “The development of this Iran war is having an enormous impact,” said Jed Ellerbroek, portfolio manager at Argent Capital Management, as quoted by CNBC International. “Investors may be proven right that there is nothing to worry about, Trump will handle it, there will be a deal with Iran and the Strait of Hormuz will reopen. But if not, it feels like oil prices need to go much higher,” he said. He added that under current investment conditions, it is very difficult for investors to feel comfortable. Chip sector stocks were again under pressure on Wednesday. Shares of Micron Technology, Advanced Micro Devices, and Broadcom fell for the fourth day in the last five trading sessions. The iShares Semiconductor ETF (SOXX) plunged more than 3% after weakening again since Tuesday. Last week, chip stocks were hit hard, causing SOXX to plummet 10% in a single day on Friday. After a slight rebound on Monday, the sell-off continued on Tuesday. Pressure on chip stocks comes ahead of SpaceX’s initial public offering (IPO) on Friday. Several market participants assess that investors, especially retail investors, are selling some chip stocks that have recorded substantial gains to provide funds to buy shares in the largest IPO in history. However, some analysts view this weakness as merely profit-taking after a very rapid rally. Even so, the SOXX ETF is still recording a gain of about 80% so far this year. From the economic side, US core inflation data (core CPI), which excludes food and energy components, showed a lower-than-expected increase in May. Core CPI rose 0.2% month-on-month, lower than market expectations of 0.3%. Annually, core inflation stood at 2.9%, in line with analysts’ expectations, but still above the Federal Reserve’s 2% inflation target. Meanwhile, headline inflation, which includes all price components, rose through 4% for the first time in three years. American forces began launching additional strikes against several targets in Iran at 5:15 p.m. EDT (21:15 GMT), according to a United States Central Command statement posted on platform X on Wednesday. “These strikes are a response to Iran’s unprovoked and ongoing aggression,” the US military said. According to several US media reports, the strikes targeted vital Iranian facilities, including ammunition depots, command and control centres, and military logistics facilities. This move is the latest escalation in tensions between Washington and Tehran following the incident of the downing of a US Army Apache helicopter near the Strait of Hormuz. Indonesia’s financial market today will still be faced with dynamics ranging from war to investors continuing to scrutinise domestic fiscal resilience and the continuation of global macroeconomics. The JCI and rupiah are in a strengthening phase. However, the JCI and rupiah party could be ruined by two pieces of bad news from the United States, namely new strikes by the US military and soaring US inflation.