Ria Fortuna Wijaya, Associated Press, Jakarta – Jakarta Composite Index (JCI) plunged sharply on Wednesday, tumbling 362 points or 4.57% to close at 7,577, as investors reacted to intensifying geopolitical tensions in the Middle East and a downgrade of Indonesia's sovereign outlook by Fitch Ratings.
The benchmark index briefly slumped more than 5% intraday, trading within a range of 7,486 to 7,897 before closing deeply in the red.
Market activity remained heavy. Trading volume reached 52.82 billion shares, with total turnover of Rp 29.49 trillion ($1.74 billion) across more than 3.2 million transactions. Only 54 stocks advanced, while 734 declined and 33 remained unchanged.
Investor sentiment deteriorated after Fitch Ratings revised Indonesia's sovereign credit outlook from stable to negative, citing growing fiscal risks and policy uncertainties. The revision follows a similar move earlier by Moody's Ratings, which also downgraded Indonesia's outlook to negative, while S&P Global Ratings has maintained a stable outlook but flagged concerns over potential fiscal weakening.
The convergence of warnings from global institutions, including Moody's, Fitch, S&P Global Ratings, and the MSCI index provider, has raised alarms among investors over the trajectory of Indonesia's economy and capital markets.
Fitch specifically highlighted the government's free nutritious meals program (MBG) and the mandate of Danantara Indonesia as among the factors that could pose risks to the country's fiscal position.
External pressures also weighed heavily on markets.
Pilarmas Investindo Sekuritas said Asian markets broadly traded in negative territory, mirroring declines on Wall Street and European exchanges as investors monitored escalating tensions in the Middle East following attacks involving the United States, Israel, and Iran. "Prolonged conflict in the Middle East could sustain the rally in energy prices, triggering inflation concerns and prompting investors to scale back expectations for interest rate cuts by the Fed," Pilarmas wrote in a research note on Wednesday.
Earlier, US President Donald Trump pledged to safeguard oil tanker routes through the Strait of Hormuz to prevent potential energy supply disruptions stemming from the conflict between the US and Iran.
However, Pilarmas said markets remain skeptical about the effectiveness of such intervention. "The market appears unconvinced that the US president's assurances regarding escorts in the Strait of Hormuz will fully mitigate the risks," Pilarmas noted. "This geopolitical situation involves many parties, making it difficult to predict and potentially creating long-term risks."
Oil prices have climbed sharply since the conflict began. US benchmark crude rose 1.3% to $75.53 per barrel, while Brent crude, the international benchmark, gained 1.7% to $82.74 per barrel, bringing its total increase to more than 13% since the war started.
Mizuho Bank said Washington's assurances may ease but not eliminate risks to energy prices. "Trump's assurances of US underwriting of shipping insurance against Middle East conflict risks and even US naval escorts only mitigate, but do not eliminate, enduring upside risks to oil prices," the bank said.
The bank added that higher shipping insurance costs could increase oil prices by $5 to $15 per barrel, as the "war premium" remains embedded in the market amid escalating regional attacks.
Regional markets also suffered heavy losses.
South Korea's Kospi led the regional decline, plunging 12.1% to 5,093.54, as energy security concerns overshadowed optimism surrounding semiconductor companies benefiting from the global artificial intelligence boom. Shares of Samsung Electronics dropped 11.7%, while SK Hynix fell 9.6%.
Trading in the Kospi was temporarily halted after a market circuit breaker was triggered, while the technology-heavy Kosdaq also briefly halted trading after falling more than 8% before eventually sliding nearly 14%.
Elsewhere in Asia, Japan's Nikkei 225 dropped 3.9% to 54,059, the Hang Seng in Hong Kong fell 2.9% to 25,023.18, and China's Shanghai Composite slipped 1.2% to 4,074.
Earlier in the United States, Wall Street also closed lower. The S&P 500 lost 0.9% to 6,816, while the Dow Jones Industrial Average declined 0.8% to 48,501, reflecting concerns that rising oil prices and prolonged conflict could weigh on global economic growth.
Domestically, Pilarmas said investors are also worried about Indonesia's energy resilience, after the Energy and Mineral Resources Ministry revealed that the country's fuel reserves would only last around 20 days.
"This raises concerns over the certainty of sustained import activities," Pilarmas said. The brokerage added that prolonged Middle East tensions could strain Indonesia's state budget if oil prices continue to surge. "With uncertainty over when the Middle East conflict will ease, markets fear the impact on the state budget due to rising global crude prices," Pilarmas noted. "Investors are concerned the budget deficit could widen beyond 3%."
The government has pledged to keep the fiscal deficit below the 3% of GDP threshold, even as geopolitical tensions threaten stability through rising global oil prices. As a precautionary measure, the Energy Ministry is considering increasing crude imports from the United States.
Pilarmas also noted that Fitch's decision to revise Indonesia's outlook while maintaining the country's BBB long-term foreign currency issuer default rating reflects rising policy uncertainty.
"The outlook revision reflects increasing policy uncertainty and concerns over the consistency and credibility of Indonesia's economic policy mix amid growing centralization of decision-making," Pilarmas said.