The Impact of the US–Israel vs. Iran War on Indonesia’s Financial Markets
KBVS MACRO UPDATE
Monday, 2 March 2026
The Impact of the US–Israel vs. Iran War on Indonesia’s Financial Markets
Although Indonesia is not directly involved in the conflict, spillover effects are likely to be transmitted through trade channels, commodity prices, capital flows, and global market sentiment. Another key risk is the potential widening of the CAD. A higher energy import bill would directly weaken the current account balance.
In financial markets, depreciation pressure on the Rupiah represents a significant concern. During periods of heightened global uncertainty, investors typically engage in flight-to-quality behavior. Furthermore,due to higher sovereign risk premiums, while corporate bond spreads may widen as credit risk perceptions increase. The equity market may face corrections driven by downward earnings revisions and a higher equity risk premium. From a monetary policy perspective, Bank Indonesia’s room to ease interest rates could become more constrained if inflationary pressures intensify, limiting policy flexibility to support economic growth during external shocks.
Regards,
Fikri C Permana – KBVS Research Team