Ongoing Geopolitical Tensions Continue To Drive Market Volatility
Oil prices spiked, JCI dropped, and the Rupiah weakened as geopolitical tensions escalate.
Dear Clients,
Escalating geopolitical tensions over the weekend have added further volatility to Indonesian markets. Over the weekend, President Donald Trump signaled plans to intensify attacks and Iran vowed to continue retaliatory strikes, which weakened risk sentiment significantly. As a result, the Jakarta Composite Index (JCI) declined further by -3.27% on Monday (March 9), with heightened uncertainty triggering broad-based selling among investors.
Concerns have also intensified around the Strait of Hormuz, a critical shipping route that carries roughly 20% of global oil supply. Fears of potential supply disruptions pushed Brent crude oil prices above USD $100 per barrel on Monday, raising the risk of inflationary pressures for economies such as Indonesia, which is a net oil importer. At the same time, the Rupiah briefly weakened beyond the 17,000 level against the US Dollar, reflecting rising geopolitical risk and capital market volatility.
Last night, President Donald Trump suggested that the U.S.–Israel conflict with Iran could end “very soon,” though his remarks were mixed, noting that “we have won in many ways, but not enough,” indicating that the situation remains unresolved. Following the comments, oil prices declined to around ~$90 per barrel, although they continue to trade at significantly higher levels compared to a few weeks ago. The JCI also rebounded slightly, closing Tuesday higher by +1.41%. That said, market conditions remain fragile, and both oil prices and equity markets have yet to fully stabilize amid ongoing geopolitical uncertainty.
Simpan’s Views
We have previously advised clients to brace for volatility as the situation continues to evolve. Our portfolio positioning remains the same. We are building higher cash levels where we see the need to, trimming exposure to positions that no longer align with the current investment landscape.
Our portfolio remains highly allocated towards the commodity sectors: particularly coal, gold, and oil & gas names. The existing allocations to energy and commodity producers already provide natural exposure to the areas of the market most directly affected by supply shocks and rising resource prices. This positioning allows the portfolio to participate in potential upside from commodity markets while also serving as a buffer against inflationary pressures that may arise from higher energy costs.
Our Investment Team has published a research paper discussing the evolving geopolitical landscape and the implications to commodities, Indonesian markets, as well as our portfolio positioning. Click here to read more.
Thank you for your continued trust.