Global economic conditions remain exposed to escalating tensions in the Middle East, as disruptions around the Strait of Hormuz threaten global energy supplies. Brent crude climbed to US$106.60/bbl following renewed attacks on energy infrastructure and shipping routes. Prolonged disruptions could push energy prices higher, increasing transportation and production costs and heightening the risk of renewed inflationary pressures.

On the macro front, US September CPI reached 3.7% YoY, above the 3.6% market expectation, while core CPI stood at 2.6% YoY, exceeding the Fed’s 2.0% inflation target. Persistent inflation and higher energy costs have increased the market-implied probability of a Fed rate hike from 20% to 50%. If the Fed raises rates at its upcoming meeting later this month, gold could face further downside pressure as higher interest rates strengthen the opportunity cost of holding non-yielding assets. Meanwhile, the AI investment boom continues to require substantial funding, with Anthropic’s planned infrastructure commitments of at least US$518 billion over a decade highlighting concerns over financing costs and long-term investment returns.

Domestically, the rupiah briefly weakened to around Rp18,000 per US dollar, adding to imported inflation risks and pressure on domestic financial conditions. Indonesian equities also face uncertainty ahead of MSCI’s November review, as developments surrounding market accessibility could influence foreign investor positioning. A combination of currency weakness, elevated global yields and potential Fed tightening could further challenge emerging-market sentiment.

At the stock level, we maintain a wait-and-see approach ahead of the MSCI review and the Fed’s upcoming policy decision. We prefer to preserve cash and remain selective in fundamentally resilient stocks rather than aggressively accumulate positions amid heightened uncertainty. Gold may face further downside if the Fed delivers a rate hike, while a more constructive equity stance would require greater clarity on policy developments, currency stability and foreign fund flows.