Iran war drives oil prices higher, straining Indonesia's credit market through inflation risks and capital flight. Rising oil costs swell Indonesia's import bill, fueling inflation that erodes bond purchasing power and triggers investor withdrawals. This threatens the nation's creditworthiness as foreign capital flees to safer assets.

Capital outflows accelerate as investors seek refuge from inflation risks, while the central bank faces pressure to hike rates. Higher borrowing costs could cripple corporate bond demand, particularly for heavily indebted firms reliant on foreign financing. The Iran war thus creates a vicious cycle where energy shocks amplify financial instability.

Indonesia's ability to maintain bond market stability hinges on managing inflation expectations and restoring investor confidence. Failure to curb price pressures may trigger broader credit rating downgrades and further capital flight, deepening the country's economic vulnerability.