Jakarta. Jakarta stocks fell 0.47% to 6,118 at Tuesday’s opening as rising oil prices and persistent Middle East tensions heightened inflation risks and concerns that Bank Indonesia (BI) could be forced to raise interest rates.

A total of 1.93 billion shares changed hands in early trading, with a transaction value of Rp 445.27 billion ($24.74 million) across 66,993 transactions. Declining stocks outnumbered gainers, with 301 stocks falling, 164 rising and 205 remaining unchanged.

Phintraco Sekuritas said higher oil prices amid uncertainty over the Middle East conflict could fuel inflation, increasing the risk of monetary tightening if inflation rises above BI’s target.

Based on BI’s assessment, every 25-basis-point increase in the benchmark BI Rate could reduce economic growth by around 0.1%. This has encouraged the central bank to keep its benchmark rate unchanged at 5.75% while relying on other instruments to stabilize the rupiah and attract capital inflows.

Meanwhile, a stronger US dollar, driven by rising oil prices, expectations of Federal Reserve rate hikes and higher US Treasury yields, could trigger capital outflows from emerging markets and put renewed pressure on the rupiah.

Phintraco previously noted that BI had introduced hedging cost incentives to attract foreign capital without raising the BI Rate or increasing yields on Bank Indonesia Rupiah Securities (SRBI). The brokerage said the incentives, which had been in place for about a month, had helped attract around $6 billion in capital inflows through Domestic Non-Deliverable Forward (DNDF) and swap transactions.

Global sentiment remained negative, according to Kiwoom Sekuritas Indonesia, as rising oil prices and US Treasury yields renewed pressure on bond markets. Inflation concerns stemming from energy costs, heavy corporate debt issuance to finance artificial intelligence infrastructure and hawkish signals from the Federal Reserve prompted investors to sell Treasuries, pushing long-term yields to their highest levels in several years.

Pluang Research highlighted Nvidia’s record $150 billion share buyback as a concrete sign of management’s confidence in the sustainability of the artificial intelligence boom, amid growing market concerns over the sector’s growth prospects.

“What is interesting is that this move came alongside the launch of a new security system explicitly claimed to be capable of preventing hacking incidents such as the one experienced by Hugging Face. This is a different approach from Anthropic and OpenAI, which have chosen to call for a slowdown in development in the name of security,” Pluang said in its report on Tuesday.

“Nvidia CEO Jensen Huang has instead chosen the opposite path: strengthening security through technical solutions while continuing full speed ahead. This strategy is consistent with his stance against the idea of slowing the pace of AI development,” it added.

Pluang also noted that stock valuations had become cheaper relative to projected earnings, despite the rally in share prices, suggesting that the market had yet to fully price in the sector’s growth momentum.

On Wall Street, stocks held up relatively well in the previous week amid expectations of strong corporate earnings growth and a recovery in AI-related shares. Investors are now awaiting the US personal consumption expenditures (PCE) inflation data and employment report for further clues on the Federal Reserve’s monetary policy direction.

US stocks closed lower overnight, with the Nasdaq Composite falling 0.92%, the S&P 500 declining 0.77% and the Dow Jones Industrial Average losing 0.67%.

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