Jakarta. Indonesia’s benchmark stock index suffered another sharp selloff on Monday, with the Jakarta Composite Index (JCI) plunging 4.52% to close at 5,342 as investors fled risk assets amid escalating tensions in the Middle East and mounting concerns over Indonesia’s economic outlook.

The index shed 252 points, extending its decline after briefly falling more than 4% during intraday trading. Trading activity remained heavy, with volume reaching 32.4 billion shares, turnover totaling Rp 21.4 trillion ($1.17 billion), and more than 2.2 million transactions recorded. Declining stocks overwhelmingly outnumbered gainers, with 661 shares falling against 78 advancing and 78 unchanged.

Pilarmas Investindo Sekuritas said the market downturn was driven by a combination of external and domestic pressures that prompted investors to avoid riskier assets.

"Reports of Iranian missile launches toward Israeli territory have sparked fresh concerns over regional stability and threatened the already fragile ceasefire prospects," Pilarmas wrote in a research note on Monday.

According to the brokerage, the renewed escalation of conflict in the Middle East has prompted global investors to adopt a more cautious stance, triggering broad-based selling across Asian equity markets, including Indonesia.

Regional markets also came under pressure as global stocks extended losses following Wall Street's worst trading session since October. South Korea's Kospi tumbled 8.3%, Japan's Nikkei 225 fell 3.9%, Hong Kong's Hang Seng declined 1.3%, and China's Shanghai Composite dropped 1.7%.

Beyond geopolitical risks, investors remain concerned about domestic challenges, including regulatory uncertainty, rupiah depreciation, and rising political risks.

"The market continues to monitor domestic policy developments. Regulatory uncertainty, rupiah depreciation, and potential political risks are raising concerns about the outlook for Indonesia's economic growth," Pilarmas said.

The selloff came as Indonesia's financial markets faced mounting pressure. The yield on the benchmark 10-year government bond surged 33 basis points to its highest level in more than a year, while the rupiah weakened 0.8% to a fresh record low.

Rupiah has now fallen roughly 8% this year, making it Asia's worst-performing currency and pushing it beyond the psychological threshold of Rp 18,000 per US dollar.

Bloomberg data showed Indonesia's stock market has become the world's worst-performing major equity market this year, with the JCI down nearly 39% from its record high reached five months ago.

Meanwhile, Bank Indonesia reported that foreign exchange reserves fell to $144.9 billion at the end of May from $146.2 billion in April.

Although the central bank said reserves remain adequate—equivalent to 5.6 months of imports or 5.5 months of imports and government external debt payments, well above the international adequacy standard of around three months of imports—the decline has added to market concerns.

"Market participants are concerned that the decline in foreign exchange reserves reflects ongoing pressure in financial markets. This could trigger speculation over further rupiah volatility amid persistent global uncertainty," Pilarmas said.

Investors are now awaiting concrete measures from the government and monetary authorities to stem capital outflows. Uncertainty surrounding commodity export policies, economic management, and Indonesia's sovereign credit profile has weighed heavily on investor sentiment.

Mohit Mirpuri, a partner at SGMC Capital, said the next two weeks will be a critical period for Indonesia's financial markets. "The market is looking for clear signals on fiscal discipline, policy consistency, and a strong commitment to macroeconomic stability," he said.

Bank Indonesia Governor Perry Warjiyo and Finance Minister Purbaya Yudhi Sadewa have coordinated efforts to improve market liquidity and raise bond yields to attract capital back into the country. However, analysts said such measures may not be sufficient to reverse market sentiment without greater policy clarity and transparency.

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