Foreign Outflow Predicted To Rise Due To The Heat Of The Iran-Israel Conflict

Illustration of Rupiah Dollars (Photo: Antara)

JAKARTA - Bank Permata economist Josua Pardede predicts that if the geopolitical situation in the Middle East continues, it will have an impact on Indonesia's financial market conditions and will make capital flows out of the Indonesian stock market and bonds potentially increase.

"The flow of capital out of the Indonesian stock market and bonds is feared to increase after the conflict between Iran and Israel increases," he explained to VOI, Wednesday, April 17.

According to Josua, the conflict in the Middle East has increased global uncertainty, causing investors to withdraw funds from high-risk assets, especially from developing countries, including Indonesia.

Josua conveyed that geopolitical uncertainty in the Middle East encourages market players to choose to invest in safe haven assets, one of which is the US dollar, causing currencies for other countries, especially developing countries such as Indonesia, to potentially weaken.

Meanwhile, the US dollar index rose to a range of 106 following the escalation of the conflict between Iran and Israel. This condition is bad news for the Rupiah exchange rate, which this year is heavily influenced by the movement of US inflation and the Fed's monetary policy.

"Rupiah is predicted to continue to be appreciated if this conflict continues to heat up and continues," he said.

Earlier, Coordinating Minister for Economic Affairs Airlangga Hartarto said the geopolitical situation that was heating up between Iran and Israel triggered investors to look for safe or safe-haven assets such as the United States (US) dollar and gold.

Meanwhile, demand for safe-haven assets rose amid rising tensions in the Middle East after Iran fired drones and missiles directly at Israel.

"Escalation certainly increases uncertainty and of course what we have to mitigate is the transfer of assets to safe haven, in this case the US dollar, gold, nickel also increased," said Airlangga after the Halal Bihalal event at the Coordinating Ministry for Economic Affairs, Jakarta, Tuesday, April 16.

Airlangga said that the dollar index financial market has strengthened various countries. In addition, the exchange rate and stock price index of various countries have weakened globally.

"However, Indonesia is relatively better than peer countries in ASEAN. Then we also see that we need to maintain financial market stability," he explained.