Storm of Bad News: War Reignites, IMF Slashes Outlook, Fed Remains Hawkish
Indonesia’s financial markets are expected to face continued heavy pressure today. The Jakarta Composite Index (JCI) plunged nearly 2% on Wednesday (8/7/2026), ending a six-day winning streak. The sell-off occurred after market participants digested a warning from S&P Dow Jones Indices (S&P DJI) that placed Indonesia on its watchlist for 2027. Rising yields indicate that government bond (SBN) prices are slumping due to investor selling.
On Wall Street, US stocks closed mixed with the majority sharply lower on Wednesday, or early Thursday Indonesian time. Markets tumbled after US President Donald Trump stated at the NATO summit in Turkey that the ceasefire with Iran had ended, amid renewed conflict in the Middle East that drove a surge in oil prices. The Dow Jones Industrial Average plummeted 576.76 points, or 1.09%, to 52,348.39. The S&P 500 fell 0.28% to close at 7,482.71. In contrast, the Nasdaq Composite bucked the trend, gaining 0.2% to 25,870.65.
Oil prices also soared. Brent crude futures closed up 5.43% at US$78.19 per barrel, while West Texas Intermediate (WTI) strengthened 4.37% to US$73.52 per barrel. "I thought it was all over. I don’t want to deal with them anymore. They are trash," Trump was quoted as saying by CNBC International. Moments later, Trump threatened to attack Iran again, stating, "We will hit them hard tonight." Trump’s remarks followed what the US described as a series of major strikes against Iran on Tuesday, in retaliation for attacks on three commercial vessels transiting the Strait of Hormuz. Speaking to reporters at the NATO summit in Ankara, Turkey, on Wednesday, NATO Secretary General Mark Rutte said the US strikes were "absolutely necessary." He added, "When there is a ceasefire and Iran essentially violates it, we see what happened yesterday with the attacks on the ships. I think it is very important for the US to respond firmly."
Energy sector stocks strengthened in response. ConocoPhillips shares rose 2%, Chevron gained 1%, while Marathon Petroleum surged 5%. Conversely, consumer sector stocks potentially impacted by rising energy costs came under pressure. Home Depot shares fell 2%, McDonald’s weakened more than 1%, and Booking Holdings plunged 4%. Chipmaker stocks, which had been under pressure the previous day, began to recover. The VanEck Semiconductor ETF (SMH) rose about 2%, although the fund remains roughly 12% below its recent high. "The renewed tensions in the Middle East have halted the market narrative that was growing increasingly confident, prompting investors to re-evaluate geopolitical risks after weeks of assuming the de-escalation process would run smoothly," said Daniela Hathorn, senior market analyst at Capital.com, in a note to CNBC. She added that the latest strikes remind investors that even if a ceasefire holds, a long-term agreement between the US and Iran is far from certain. Markets had previously been comfortable with the assumption that the conflict would slowly subside, but the latest developments suggest that assumption may have been premature.
Meanwhile, minutes from the Federal Reserve meeting showed central bank officials remain divided on the direction of interest rates, needing more certainty regarding inflation. The minutes noted that many participants assessed the appropriate level for the federal funds rate would be within or slightly below the current target range by the end of the year. However, the minutes also recorded that many other participants judged the appropriate rate would actually be above the current target range.
Indonesia’s financial markets are expected to remain volatile today. Several external sentiments are anticipated to weigh on the JCI and the rupiah, including the escalating war and new global economic projections.
- War Heats Up as US Launches Strikes
The United States military launched further strikes against Iran on Wednesday (8/7/2026), aiming to degrade Tehran’s ability to threaten shipping in the Strait of Hormuz, a chokepoint through which roughly a fifth of the world’s oil supply passed before the war erupted. US Central Command (CENTCOM) stated the strikes were in retaliation for attacks on three commercial vessels in the Strait of Hormuz the previous day. President Trump also declared that the memorandum of understanding with Iran to end the conflict had "expired" and threatened a harsher response if attacks on ships recur. A US official said the latest wave of strikes would be larger than the previous day’s operation. The strikes shook several cities on Iran’s southern coast, including Bandar Abbas, Iran’s largest port, as well as Konarak and Chabahar, which experienced power outages and damage to maritime facilities. In response, Iranian state media reported that Tehran is preparing a major retaliatory strike against US military bases in the region. Iran is also considering other measures, ranging from withdrawing from the Nuclear Non-Proliferation Treaty (NPT), altering its nuclear doctrine, to closing the Bab el-Mandeb Strait, another strategic global shipping lane. The latest escalation has further dashed hopes for a permanent peace between Washington and Tehran. The tension in the Middle East also pushed global oil prices up by more than US$1 per barrel, with Brent trading around US$79.28 per barrel.
- IMF Slashes Global Economic Projections, What About Indonesia?
The International Monetary Fund (IMF) has again cut its global economic growth forecast.