Prepare for the Storm: Iran Conflict and China's Grand Agenda Could Shake Indonesia
Stocks plummeted on Friday after fresh producer price index (PPI) data came in significantly higher than forecasts, adding to mounting inflation concerns that have triggered market turmoil this month.
The Dow Jones Industrial Average fell 521.28 points or 1.05% and closed at 48,977.92. The S&P 500 weakened 0.43% to 6,878.88, whilst the Nasdaq Composite lost 0.92% and ended at 22,668.21.
The S&P 500 and Nasdaq closed February in the red amid heightened concerns about artificial intelligence’s (AI) impact on certain sectors and the overall economy. These concerns intensified after fintech company Block, owned by Jack Dorsey, announced redundancies affecting more than 4,000 employees, nearly half its workforce.
Shares in the financial sector and other cyclically-sensitive sectors also weakened on Friday. Stocks related to private credit came under pressure again as investors anticipated potential fallout from the collapse of UK mortgage provider Market Financial Solutions. Apollo and Jefferies shares were among the hardest hit, each plunging over 8% and 9% respectively.
Blue Owl, previously hammered by liquidity constraints and asset sales, fell around 6%. Several software companies also posted losses on Friday, closing out a poor month. Salesforce dropped more than 2%, as did Microsoft, which also weighed on the Dow.
Cybersecurity firm Zscaler fell 12% after deferred revenue and second-quarter fiscal billings missed expectations. CoreWeave plummeted 18% owing to disappointing projections. Nvidia extended its post-earnings decline with a 4% drop on Friday.
Its shares had previously fallen more than 5% on Thursday, shocking many investors who remained optimistic about the chipmaker following strong fourth-quarter earnings and an upcoming new product cycle. Market participants linked the share decline to doubts about Nvidia’s deal with OpenAI, weakening sentiment towards AI themes, and scepticism about whether massive AI capital expenditure from hyperscaler companies could be sustained.
Worsening market sentiment, the January 2026 producer price index, a measure of wholesale inflation, showed a 0.5% monthly increase. Economists surveyed by Dow Jones had previously forecast the headline figure at only 0.3%.
More worryingly, core PPI (excluding food and energy prices) surged 0.8%, far exceeding the forecast 0.3% increase. Stephen Kolano, chief investment officer at Integrated Partners, viewed this PPI report as an additional complication for investors, amid existing concerns about AI capital spending, potential industry disruption, and private credit market pressure.
He noted that inflation appeared to be driven increasingly by the services sector, which could signal that companies are beginning to pass tariff costs on to end consumers to protect profit margins. Labour market conditions also remain a concern. Although last month’s job growth far exceeded forecasts, Kolano remained unconvinced the labour market was genuinely stable given rising redundancies. Challenger, Gray & Christmas reported earlier this month that January redundancies reached their highest level for that month since the global financial crisis.
The Nasdaq posted declines exceeding 3% throughout February, its worst monthly performance since March last year. The iShares Expanded Tech-Software ETF (IGV) dropped nearly 10% this month, bringing year-to-date losses close to 23%. Meanwhile, the S&P 500 weakened nearly 1% throughout February, whilst the Dow actually gained around 0.2%.
Entering the first week of March 2026, market participants face a combination of geopolitical sentiment and important macroeconomic data releases that could influence the direction of global markets. Indonesian financial markets are expected to face pressure from various negative sentiments, particularly from abroad.
Middle East Ablaze
The Middle East situation escalated after the US and Israel launched strikes against Iran on Saturday (28 February 2026). The strikes killed senior Iranian officials, including Supreme Leader Ali Khamenei. The Middle East turmoil will trigger global uncertainty and risks pushing foreign investors away from emerging markets, particularly Indonesia.
The strikes also killed numerous senior Iranian military officials. Most recently, former Iranian President Mahmoud Ahmadinejad was reportedly killed in a missile strike on Tehran. Media close to Iran’s Revolutionary Guards Corps also reported that three of his bodyguards were killed. Israeli military stated that the initial strike successfully killed approximately 40 senior Iranian commanders, with operations to be expanded to nuclear facilities.
These developments increase the risk of prolonged conflict in the Middle East and represent one of the main market sentiments at the start of March.
Planned military operations spanning several days targeted Iranian military facilities, missile programmes, and strategic installations. Strikes reportedly occurred in cities including Isfahan, Tabriz, Qom, and Kermanshah.
According to Aljazeera, US President Donald Trump stated the operation aimed to destroy Iran’s missile capability, weaken its naval power, and prevent nuclear weapons development. Iran responded by firing missiles at Israeli territory and several US military bases across the Middle East, including in Qatar, Kuwait, the United Arab Emirates, and Bahrain. This escalation has intensified market concerns about energy stability and global geopolitical risk.
The situation escalated further on Sunday (1 March 2026). Sunday’s strike followed a deadly attack that killed two civilians in the capital of the United Arab Emirates, Abu Dhabi. Iran not only targeted US military bases there but also civilian infrastructure throughout the Gulf region. The UAE president’s advisor, Anwar Garg, commented on developments as regional tensions continued to mount.