Jakarta. Indonesian stocks fell 0.8% to 5,057 on Friday, weighed down by escalating US-Iran tensions, hotter US inflation and lingering uncertainty over MSCI's planned market reclassification.

Jakarta Composite Index dropped 41 points, with 194 stocks advancing, 552 declining and 217 unchanged. Total trading value reached Rp 11.2 trillion ($617.27 million).

Negative sentiment from both global and domestic markets continued to pressure investor confidence, while other Asian markets also weakened amid geopolitical concerns and uncertainty over the US monetary policy outlook.

Pilarmas Investindo Sekuritas said global investors were monitoring the possibility of further US military strikes against Iran. Concerns intensified after a senior military commander reportedly briefed US President Donald Trump on several military options.

“Trump has also repeatedly warned of the possibility of resuming airstrikes against Tehran following next week's midterm elections,” Pilarmas wrote in its research note on Friday.

Tensions also escalated following clashes involving Saudi Arabia and Iran-backed Houthi groups. The threat to shipping routes through the Strait of Hormuz remained elevated, with several oil tankers reportedly continuing to come under attack.

“These developments have kept global oil prices volatile as market participants assess the risk of disruptions to global energy supplies,” Pilarmas said.

Further pressure came from rising US inflation. The monthly personal consumption expenditures (PCE) price index accelerated to 0.5% in September from 0.3% previously. Annual PCE inflation also climbed to 3.6% from 3.4%.

PCE is one of the key inflation indicators used by the US Federal Reserve in setting interest rate policy. The latest increase strengthened market expectations of a possible rate hike toward the end of the year.

Although the Fed kept interest rates unchanged on Wednesday, the CME FedWatch Tool showed that markets were pricing in an approximately 75% probability of a rate increase in December.

Domestically, Pilarmas said investors remained cautious over uncertainty surrounding MSCI's planned reclassification of Indonesia's capital market. Investors were closely monitoring policy developments from the Financial Services Authority (OJK) and the Indonesia Stock Exchange (IDX), particularly measures to improve market transparency.

Additional pressure came from foreign investor selling in domestic financial markets, the rupiah's depreciation against the US dollar and elevated global oil prices, which fueled concerns over the country's fiscal position.

“The combination of these factors has prompted market participants to avoid higher-risk assets and shift toward instruments perceived as safer,” Pilarmas said.

Across Asia, Japan's benchmark Nikkei fell 2.1%, while South Korea's Kospi declined 3.5%. Hong Kong's Hang Seng bucked the regional trend, gaining 1.5%, while Shanghai's SSE Composite Index slipped 1.4%.

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