The Impact of the Indonesia Stock Exchange amid Iran War and Global Conflict: How Severe?

Jakarta — The Indonesian stock exchange is anticipated to face severe pressure today following US and Israeli military strikes against Iran.

Conflict resulting from war is not a new experience for the Composite Index (IHSG). This time, the market will anticipate more volatile movements in response to the military operations by the United States and Israel against Iran.

Geopolitical conflict has created a domino effect on the global economy in recent years. In 2022, commodity prices surged sharply, causing inflation to accelerate and interest rates to be forced to higher levels. That year was marked by the Russia-Ukraine war, which triggered a global energy and food crisis; prices for oil, gas, coal, and wheat rose dramatically. Inflation in the US and Europe touched its highest level in 40 years, prompting central banks such as the Federal Reserve, European Central Bank, and monetary authorities in developing countries to aggressively raise interest rates. The world entered the largest phase of global monetary tightening since the 2008 financial crisis.

Entering 2023, the continuous uptrend in interest rates saw the world face economic deceleration. Consumer purchasing power weakened and funding costs remained expensive. The effects of high interest rates began to be felt across several sectors, for instance, the regional banking crisis in the US peaked with the collapse of Silicon Valley Bank, the property sector in China remained under pressure following the spectacular Evergrande Group crisis, and global demand weakened with many countries experiencing contraction in the manufacturing sector. Despite the global economy not collapsing entirely, the phase of “high rate, low growth” became a heavy new reality for global economic activity.

In 2024, geopolitical risks became increasingly complex and widespread. The prolonged conflict between Israel and Palestine increasingly triggered tensions in the Middle East region, shipping disruptions in the Red Sea raised global logistics costs, and trade tensions between the US and China continued, particularly in sectors such as technology, chips, and electric vehicles. The major election year, including the 2024 US Presidential Election, added to global policy uncertainty. Consequently, the global economy tended to stagnate despite not falling into deep recession.

Inflation gradually began to decline, opening space for central banks to consider pivoting policy from tightening towards careful relaxation. Entering 2025, this trend became increasingly clear. Global inflation declined towards targets, allowing central banks to begin cutting interest rates gradually and global liquidity easing began again. Stock and bond markets began showing signs of recovery, although the recovery remained uneven.

However, consumers remained cautious about spending, government debt in many countries remained high following the pandemic and the era of high interest rates, and the world became increasingly fragmented through friendshoring phenomena and supply chain shifts.

Political and regional conflicts persisted, including wider escalation between Israel and Iran throughout 2025, which in June transformed into armed conflict between the two nations along with their respective allies and proxy groups.

In early 2026, the world was in a phase of “stable but fragile”: global interest rates were lower compared to 2023-2024, but interest rate levels had not returned to pre-tension levels, inflation was generally more controlled, growth began improving slightly, especially in emerging markets, and capital flows again sought yield in developing countries. However, geopolitical risks remained high and became a new pressure on the global economy.

Geopolitical conflict was no longer focused solely on Russia-Ukraine or Israel-Hamas, but had expanded to several new fronts that worsened the situation. Since early January 2026, tensions increased dramatically after the US, which had previously taken military action against Venezuela on 3 January 2026, launched a direct assault with Israel against Iran.

The US-Israeli military operation, called “Operation Epic Fury”, targeted Iran’s strategic facilities and leadership structures, killing Iran’s Supreme Leader Ayatollah Ali Khamenei and several senior officials, triggering waves of retaliatory strikes from Iran against US bases and Israeli targets in the Gulf region and neighbouring countries. This escalation increasingly triggered global concerns due to disruptions to critical energy routes such as the Strait of Hormuz and the potential for a sharp rise in global oil prices, which could impose new inflationary pressure even as central banks attempted to lower interest rates.

This became the new anticipation of market participants regarding financial market movements on Monday today (2 March 2026).

However, in its history, IHSG is not unfamiliar with wars of this nature. Here is a picture over the past five years:

From the above graph, we traced the Russia-Ukraine war that occurred on 24 February 2022, IHSG was impacted with a decline of up to 1.48% in a single day. Nevertheless, the very next day IHSG rebounded 2%, and in the medium term even managed to strengthen and break through the All-Time High at the 7,700 level.

Around a year and a half later, geopolitical conflict spread to the Middle East region, with Hamas’s attack on Israel beginning on 7 October 2023. Because this occurred on a Saturday, IHSG directly responded on Monday with a correction, fortunately the correction was relatively mild at only 0.04% in a single day. However, at that time the correction continued in the following days, and by early November 2023 IHSG had fallen to the 6,600 level, accumulating a depreciation of up to 4% from before the Hamas attack occurred.

Nevertheless, IHSG managed to reverse direction at the end of 2023, enjoying the moment of window dressing through to the January effect in 2024. Although 2024 saw turbulence regarding high interest rates and the effects of an election year, IHSG also managed to achieve its all-time high level again.