Stock Market Shadowed by Risk-Off Sentiment Following Iran-US Conflict

A brutal and deadly attack by Israel and the United States on Iran on Saturday (28 February) has shocked the world.

Mirae Asset Securities predicts that the beginning of this week the stock market will be shadowed by risk-off sentiment. This follows the deteriorating geopolitical situation in the Middle East following the coordinated US-Israel attack on Iran.

“Selling pressure has the potential to trigger corrections and trigger foreign outflows from the Indonesian stock market and government bonds, accompanied by weakening of the rupiah,” said Head of Research & Chief Economist Mirae Asset Securities Rully Arya Wisnubroto in a statement received on Monday (2 March).

In such conditions, he said, Bank Indonesia will likely intensify intervention in the foreign exchange market (spot, DNDF) and in the government bond market to dampen excessive volatility in the rupiah and yields.

Rully cited the escalation of Middle East conflict as increasing the risk of an oil price surge and sharpening global risk perception. This is prompting a shift in allocation to safe-haven assets such as US dollars and gold.

“For Indonesia, the main channels that need to be watched are imported inflation and subsidy pressure due to rising energy prices, potential widening of the current account deficit, and portfolio outflows that put pressure on the exchange rate,” he said.

Meanwhile, the Acting Chief Executive of the Indonesia Stock Exchange (BEI) Jeffrey Hendrik urged investors to remain rational.

“Facing increased uncertainty due to geopolitical escalation occurring at the global level, we urge investors to remain rational and always pay attention to fundamentals. Adjust your investment strategy according to each investor’s own risk tolerance,” Jeffrey said in his statement on Monday (2 March).

The Composite Stock Price Index (IHSG) of the Indonesia Stock Exchange (BEI) opened weaker on Monday morning (2 March) amid pressure from Asian stock exchanges, which was triggered by increased conflict between Iran and the US.

The Composite Stock Price Index (IHSG) is expected to move fluctuately throughout this week. The index will move fluctuately with a tendency towards consolidation this week, as global geopolitical risks increase.

Acting Chief Executive Jeffrey Hendrik reminded investors to remain rational amid the Middle East conflict.