Jakarta.  Indonesian stocks staged another strong rally on Wednesday as investors welcomed Bank Indonesia's surprise interest rate hike and signs of greater fiscal discipline, sending the benchmark Jakarta Composite Index (JCI) up 2.71% to 5,902.

The index traded between 5,677 and 5,942 during the session. Trading volume reached 46 billion shares, with turnover totaling Rp 31 trillion ($1.72 billion) and more than 3 million transactions recorded. Gainers outnumbered losers 571 to 148, while 96 stocks were unchanged.

The rally came even as global sentiment deteriorated after the United States launched strikes against Iran in response to the downing of a US military helicopter. Iranian Foreign Minister Abbas Araghchi vowed that Tehran would not leave attacks or threats unanswered, fueling concerns of a broader regional conflict.

"The tensions have also pushed global oil prices higher, raising concerns over global inflation and the potential for tighter monetary policy in major economies," Pilarmas Investindo Sekuritas wrote in a research note.

Oil prices resumed their climb as uncertainty persisted over the full reopening of the Strait of Hormuz. Brent crude, the international benchmark, rose 0.4% to $91.78 per barrel, compared with around $70 before the conflict began in late February.

Despite the external headwinds, Pilarmas said the domestic market found support in Bank Indonesia's decision to raise its benchmark interest rate by 25 basis points to 5.50%.

"The policy is seen as strengthening rupiah stability after the currency came under pressure against the US dollar, while also preserving the attractiveness of domestic assets to foreign investors," the brokerage said.

Investors also welcomed calls for greater fiscal discipline from the National Economic Council (DEN), including proposals to improve spending efficiency and review priority programs such as the Free Nutritious Meals (MBG) program.

"These measures are considered important for maintaining fiscal resilience and investor confidence," Pilarmas added.

Separately, Reliance Sekuritas Indonesia Director Reza Priyambada said the JCI's gains were also supported by dividend distribution announcements from listed companies and the rupiah's appreciation against the US dollar.

"The JCI's rally is continuing as investors take advantage of stocks that are still considered relatively cheap despite recent gains. Positive sentiment from dividend announcements and a stronger rupiah has also supported market performance," Reza said.

He said the combination of those factors had helped sustain investor optimism despite ongoing global uncertainties. However, he cautioned that investors should remain alert to potential profit-taking after the market's strong rally in recent days.

According to Reza, the sustainability of the JCI's advance will depend on continued capital inflows, rupiah stability, and positive sentiment from corporate earnings and actions by domestic issuers.

Elsewhere in Asia, markets retreated sharply following a Wall Street sell-off in technology stocks. South Korea's benchmark Kospi dropped 4.5% to 7,730, with shares of Samsung Electronics falling 6.1% and chipmaker SK Hynix sliding 7.5%.

Japan's Nikkei 225 declined 1.9% to 64,179 after data showed the country's producer price index rose 6.3% year-on-year in May, marking the fastest increase in more than three years. Hong Kong's Hang Seng Index fell 0.6% to 24,407, while China's Shanghai Composite Index slipped 0.4% to 3,993.

Overnight on Wall Street, the benchmark S&P 500 fell 0.3% to 7,386. The Dow Jones Industrial Average edged up 0.2% to 50,872, while the technology-heavy Nasdaq Composite declined 1% to 25,678, extending the sell-off in tech stocks that weighed on sentiment across Asian markets.

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