Jakarta. Indonesia's benchmark stock index staged a powerful comeback on Tuesday, surging 7.57% to close at 5,746 as investors rushed back into equities following Bank Indonesia's surprise rate hike, renewed optimism over state-backed stock buybacks, and easing geopolitical tensions abroad.

A total of 678 stocks advanced, while only 87 declined and 48 were unchanged. Trading value on the Indonesia Stock Exchange (IDX) exceeded Rp 27.8 trillion ($1.54 billion).

The rally marked the JCI's first gain since June 3 after several consecutive sessions of losses. Pilarmas Investindo Sekuritas attributed the rebound to improving global sentiment as tensions in the Middle East showed signs of easing.

Investors welcomed reports that Iran and Israel had agreed to halt attacks against each other, fueling hopes of broader de-escalation in the region. "The development has eased concerns over potential disruptions to global energy supplies that could trigger higher inflation," Pilarmas wrote in a research note.

Domestically, Pilarmas noted that the JCI rebounded despite persistent concerns over geopolitical risks, domestic macroeconomic challenges, and rupiah weakness.

The brokerage said gains were driven mainly by large-cap stocks and optimism surrounding discussions between House of Representatives leaders, state-owned banks, BPJS Ketenagakerjaan, and state-owned insurers regarding a potential buyback of state-owned enterprise shares.

"The initiative is viewed as an effort to restore investor confidence amid ongoing volatility in the capital market," Pilarmas said.

Positive sentiment was also supported by clarification from the Energy and Mineral Resources Ministry that the gross-split revenue-sharing scheme would apply only to oil and gas projects and not to mineral and coal operations.

The clarification eased concerns over potential fiscal policy changes in the mining industry. "The government is seen as remaining cautious in altering mining policies in order to preserve the investment climate and support downstream industrialization programs," Pilarmas added.

BRI Danareksa Sekuritas (BRIDS) identified three main catalysts behind Tuesday's rally.

First, Bank Indonesia raised its benchmark interest rate by 25 basis points to 5.50%, reinforcing its commitment to rupiah stabilization and inflation control while improving Indonesia's appeal to portfolio investors.

Second, discussions involving the House, Danantara, Himbara banks, BPJS institutions, and state-owned insurers on potential buybacks of Himbara bank shares signaled coordinated domestic efforts to support the market following foreign outflows.

"This is a positive signal for the market and demonstrates coordinated domestic stabilization efforts after foreign selling pressure," BRIDS said on Tuesday.

Third, the government clarified that no gross-split mechanism would be applied to export activities, easing concerns over potential disruptions to exporters' cash flows.

Meanwhile on regional markets were mostly higher on Tuesday. South Korea's Kospi jumped 8.2%, while Japan's Nikkei 225 rose 2.2%, led by technology stocks. Hong Kong's Hang Seng slipped 0.4%, while Shanghai's Composite Index gained 1.3%.

On Wall Street overnight, the S&P 500 rose 0.3%, the Nasdaq Composite gained 0.9%, and the Dow Jones Industrial Average edged down 0.2%.