IHSG Green Amid Israel-Iran Escalation, Investors Still Need to Be Alert

JAKARTA, KOMPAS - The Composite Stock Price Index moved positively at the opening of trading on Monday (16/6/2025). This movement occurred amid concerns from global stock market participants facing a sudden escalation of military attacks between Israel and Iran.

The Composite Stock Price Index (IHSG), which opened at 7,158, rose to 7,199 at 10:00 AM WIB. Citing data from RTI Business, this increase occurred despite 306 stock prices declining compared to 215 stock prices that experienced an increase and 159 stock prices that remained unchanged since the market opened.

Economist Rully Arya Wisnubroto from Mirae Asset Sekuritas Indonesia, in his market review on Monday morning, reminded investors to remain vigilant regarding short to medium-term market volatility that could impact the domestic stock market.

This market turmoil was triggered by a large-scale military operation by Israel against Iran on Friday (13/6/2025) early in the local morning, which was subsequently retaliated by Iran on the same day. The two countries continued to exchange attacks over the weekend. This conflict has shifted from years of covert operations and proxy wars to direct military battles with high intensity.

The situation is a factor in rising energy prices and demand for safe haven assets such as gold which is likely to continue to increase. As tensions in the Middle East occur, oil prices have soared, with Brent crude rising 7.3 percent to US$73 per barrel. Demand for safe haven assets has also increased, pushing gold prices up 1.4 percent to US$3,432 per troy ounce.

"This condition has the potential to trigger a significant outflow of foreign funds from the Indonesian stock market, particularly in stocks that are widely held by foreign investors such as BMRI (PT Bank Mandiri Persero Tbk) and BBRI (PT Bank Rakyat Indonesia Persero Tbk)," he stated.

Rully also recommended a cautious stance towards Indonesian stocks, with a preference for stocks related to oil and gold such as MEDC (Medco Energi International Tbk), ANTM (Aneka Tambang Tbk), and MDKA (Merdeka Copper Gold Tbk).

"Several key factors that need to be monitored include Israel's continued attacks on Iran's nuclear or oil infrastructure, the potential retaliation from Iran targeting the Strait of Hormuz, and the possibility of the resumption of nuclear negotiations or de-escalation efforts," he explained.

The sudden escalation between Iran and Israel has so far caused a sharp decline in the stock market in the United States. The Dow Jones Industrial Average fell by 1.8 percent, closing at 42,197.8, while the S&P 500 weakened by 1.1 percent to 5,977.0.

Equity Analyst of PT Indo Premier Sekuritas (IPOT), Imam Gunadi, in his statement mentioned that last week, the Composite Stock Price Index (IHSG) closed up by 0.74 percent at the level of 7,166.06 at the end of trading on Friday, June 13, 2025. The IHSG experienced an increase at the beginning of last week due to a meeting between the United States and China in London.

In fact, within a week, the highest position of the Composite Stock Price Index (IHSG) reached 7,239.95. This strengthening of the IHSG occurred because the United States and China have agreed on a framework to implement a ceasefire in the trade war.

However, not long after the trade war subsided, a new conflict emerged that was not in the realm of tariff wars, but rather a "real" war. On June 13, 2025, Israel launched the largest airstrike in the history of the conflict between the two countries in Operation Rising Lion against Iranian territory.

Imam believes that the Israel-Iran conflict heightens concerns about the outbreak of a major war in the Middle East. Countries such as Lebanon (through Hezbollah), Syria, and Yemen (Houthi) are expected to become involved if the escalation continues, along with the intervention of countries with significant military power such as the United States.

The escalation of the conflict between Israel and Iran, according to him, also has the potential to hold back the interest rate policy of the US Central Bank, The Federal Reserve (The Fed) in a meeting that will take place this week, June 16-20, 2025. "Therefore, this week IPOT projects that the JCI will weaken with support (lowest point) of 6,994 and resistance (highest point) at 7,239," he said.

Previously, the multinational financial institution from the United States, JP Morgan, estimated that if tensions escalate in Iran, global oil prices could soar to reach 120 US dollars per barrel. With rising oil prices, there is potential for an increase in consumer inflation (CPI) in the United States, which could ultimately also impact the Federal Reserve's interest rate policy.

Previously, The Fed had shown signs of lowering interest rates, providing a "breath of fresh air" for many developing countries such as Indonesia. However, this latest development has the potential to exacerbate global economic uncertainty.

"Attacks on Iran could push oil prices to 120 US dollars, which would then increase the US CPI inflation to 5 percent, and reopen the possibility of an interest rate hike by The Fed," the report stated.