War Still Heating Up, IMF Reveals Worst-Case Global Economy Scenario

Indonesia’s financial markets are expected to face considerable pressure today due to ongoing war uncertainties combined with continued sell-off actions in the domestic market. For more details on today’s market projections, see page 3 of this article. From the US stock market, Wall Street strengthened on Tuesday, or early Wednesday Indonesian time. The exchange rose as market participants ignored the failure of peace talks between the US and Iran but remained optimistic that an agreement between the two countries is still possible. The S&P 500 index rose 1.18% and closed at 6,967.38. The Dow Jones Industrial Average appreciated 317.74 points, or 0.66%, to 48,535.99. Meanwhile, the Nasdaq Composite surged 1.96% and ended at 23,639.08. Technology stocks once again supported the overall market. Oracle, for example, rose 4.7%, continuing a more than 12% increase from the previous session. Nvidia and Palantir Technologies also recorded positive sessions. Wall Street has once again demonstrated resilience amid rising geopolitical uncertainty. Major indices recorded solid gains at the start of the week despite the collapse of US-Iran negotiations over the weekend. US President Donald Trump also stated on Monday that Iran had contacted the US because it was very eager to make a deal. Monday’s rise erased all S&P 500 losses since the Iran war began. “I don’t want to rule out the possibility of renewed escalation and further weakening from here, but I think the chances are small. I believe the market has already priced in a certain level of anxiety regarding Iran,” Ross Mayfield, investment strategist at Baird, told CNBC International. “It seems we’re approaching record highs again with a cleaner market position and a more supportive backdrop, plus the earnings season that should drive bullish sentiment.” He added. On Tuesday, a White House official said the second round of negotiations between Washington and Tehran is being discussed. However, no official schedule has been set. Crude oil prices reversed from the previous day’s gains. West Texas Intermediate crude futures fell 7.87% to US$91.28 per barrel, while Brent crude weakened 4.6% to US$94.79 per barrel. Market sentiment was also supported by the release of March producer price index (PPI) data, which rose much lower than market expectations on a monthly basis. Nevertheless, shares of some companies were pressured after the latest earnings reports. Wells Fargo posted disappointing results, causing its shares to drop more than 5%. JPMorgan Chase reported better-than-expected first-quarter performance but cut its net interest income guidance, so shares fell slightly. Kicking off today’s trading day, here is a summary of strategic events and economic data releases from the previous day that warrant attention for navigating today’s market dynamics. This series of data is important because it can influence the direction of the rupiah, JCI, bonds, and commodity prices. Moreover, global markets are still seeking certainty on the strength of world economic growth amid potential interest rates signalled higher for longer due to the war in the Middle East resulting from rising global oil prices. IMF Cuts World Growth The International Monetary Fund (IMF) has cut its global economic growth projection due to a surge in energy prices from the war in the Middle East and disruptions in shipping through the Strait of Hormuz. In the April 2026 World Economic Outlook report, the IMF estimates that the global economy will grow 3.1% this year. This figure is down from the 3.3% projection in January 2026, before hostilities broke out following the US-Israel attack on Iran that began on 28 February, which triggered Tehran’s retaliatory strikes and expanded the regional conflict. The IMF has prepared several scenarios: mild, bad, and severe. In the worst-case scenario, the world economy is nearly in recession, with average oil prices at US$110 per barrel in 2026 and US$125 in 2027. Global growth could drop to 2.0%. The IMF’s baseline scenario assumes a short conflict and oil prices falling to an average of US$82 per barrel in 2026. However, IMF economist Pierre-Olivier Gourinchas said current conditions are already moving towards a worse scenario. The biggest impacts are expected in developing countries and the Middle East and Central Asia region. Growth in that region is projected to fall to 1.9% in 2026. For major economies, the United States is expected to grow 2.3%, the Eurozone 1.1%, China to expand 4.4%, and India to grow 6.5%. For Indonesia, the IMF maintains its growth projection at 5.0%. War Developments US President Donald Trump said on Tuesday that talks to end the Iran war could resume in Pakistan in the next two days after the failure of negotiations last weekend prompted Washington to impose a blockade on Iranian ports. Officials from the Gulf region, Pakistan, and Iran also said US and Iran negotiation teams are likely to return to Pakistan this week, although a senior Iranian source said no date has been set. “You’d better stay there, because something could happen in the next two days, and we’re leaning that way,” Trump said in an interview with the New York Post. Although the US blockade has triggered strong rhetoric from Tehran, signs that diplomatic channels are still open have helped calm oil markets, with benchmark prices falling below US$100 on Tuesday. Iran has effectively closed the Strait of Hormuz, a vital global sea route for oil and gas transportation, since the war began on 28 February. Around 5,000 people have reportedly been killed in the conflict. Negotiations in Islamabad last weekend did not yield an agreement, raising doubts about the continuation of the two-week ceasefire that has one week remaining.