Jakarta. Indonesian stocks fell sharply on Tuesday as investors turned cautious ahead of MSCI’s August index review, while renewed uncertainty over the Middle East weighed on regional markets.

Jakarta Composite Index (JCI) dropped 97 points, or 1.53%, to 6,267, after moving between 6,230 and 6,388 during the session.

Trading volume reached 35.4 billion shares, with turnover totaling Rp 14.51 trillion ($812.61 million) across more than 2.19 million transactions. A total of 141 stocks advanced, 542 declined and 108 were unchanged.

Pilarmas Investindo Sekuritas said investors were taking a cautious stance ahead of the MSCI review scheduled for August.

“Market participants hope that reforms undertaken by domestic capital market regulators can pave the way for MSCI to soon lift the freeze on Indonesian stocks in its index review,” Pilarmas said in a research note.

MSCI’s decision on Indonesia has become a key focus for investors because it could affect perceptions of the domestic stock market. The review is also expected to provide greater clarity on MSCI’s policy direction for Indonesian equities.

Amid external pressures, Pilarmas said the nomination of Destry Damayanti as the sole candidate for Bank Indonesia governor could provide a positive catalyst for the market.

“However, the challenge ahead is to maintain BI’s independence while supporting the government’s economic growth agenda,” Pilarmas said.

Destry’s nomination is expected to provide certainty and policy continuity following Perry Warjiyo’s resignation. Her experience at BI is also seen as supporting efforts to maintain rupiah stability and keep inflation under control.

In Asia, regional markets traded mixed as hopes for a Middle East peace deal and the reopening of the Strait of Hormuz faded again.

US President Donald Trump on Monday called on Iran to compensate for lives lost in the conflict, after Tehran demanded compensation for damage caused by US and Israeli attacks.

The standoff has reduced hopes for a swift resolution between the US and Iran. Prolonged uncertainty has also pushed up global oil prices, raising concerns over inflation and the outlook for interest rates.

Beth Hammack, president of the Federal Reserve Bank of Cleveland, said several interest rate increases may be needed to bring inflation back to the US central bank’s 2% target.

In regional markets, South Korea’s Kospi gained 0.7% to 6,345, while Hong Kong’s Hang Seng fell 1.1%. The Shanghai Composite Index dropped 0.8% to 3,934.

On Monday, the S&P 500 slipped 0.1% from its record high set on Friday. The Dow Jones Industrial Average fell 0.1%, while the Nasdaq Composite declined 0.3%.

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