Jakarta. Escalating tensions in the Middle East sent shockwaves through global markets as US stocks retreated from record highs following Iran's missile strike on Israel.

The S&P 500 fell 0.9 percent, while the Dow Jones Industrial Average dropped 173 points or 0.4 percent, and the Nasdaq composite lost 1.5 percent. Investors grew concerned about potential disruptions to oil supplies, as the region is critical to global energy production.

White House National Security Adviser Jake Sullivan called Iran’s missile attack a “significant escalation,” although he said it was ultimately “defeated and ineffective.”

Iran Fires Missiles Into Israel

Oil prices surged in response to fears of further conflict. US crude oil rose 2.4 percent, settling at $69.83 per barrel, while Brent crude, the international standard, climbed 2.6 percent to $73.56 per barrel. Though Israel itself is not a major oil producer, Iran is, and any wider conflict in the region could affect other oil-producing countries.

Meanwhile, in Indonesia, the Jakarta Composite Index (JCI) dropped 0.53 percent to 7,601.7 points. However, positive economic data, including a contained inflation rate of 1.84 percent year-on-year and a strengthened Nikkei Manufacturing PMI, helped stabilize the market.

"The escalating tensions in the Middle East began to shake investor confidence, especially regarding the stability of the US stock market, which was already highly valued," NH Korindo Sekuritas Indonesia said in its research note on Wednesday.

In Asia, Japan's Nikkei 225 rebounded 1.9 percent following a steep loss the previous day, as the country's unemployment rate fell to 2.5 percent. Chinese and South Korean markets remained closed due to holidays.

Add as a preferred source on Google +