Suspected IS militants stage deadly attack in Jakarta

Suspected Islamic State militants staged a gun-and-bomb assault in central Jakarta, killing several people in the worst attack in the Indonesian capital since at least 2009.

At least three blasts occurred near the Sarinah shopping center, close to the United Nations office, with a Starbucks a possible target of the explosives.

Some accounts reported bombs were detonated, while others said grenades were thrown.

The attack was "very likely" linked to Islamic State or its members returning home, said Mr Sutiyoso, head of the country's intelligence agency.

Seven people were killed, including four attackers, Associated Press reported, citing a police spokesman.

A police traffic post in the busy intersection was badly damaged while another explosion occurred outside a nearby Starbucks.

The rupiah was down 0.6 per cent after falling as much as 1 per cent against the dollar, while the Jakarta Composite Index of shares closed 0.5 percent lower after dropping as much as 1.8 percent.

Concerns about attacks in Southeast Asia have grown as Islamic State's call for global Jihad attracts extremists from the region to Syria and Iraq, fueling fears they would return to their homelands trained and radicalised.

While police didn't say if anyone had claimed responsibility for the blasts, authorities received a threat from Islamic State in December that it would shine an international spotlight on Jakarta, Metro TV reported, citing a police official.

The police "strongly suspect" an Islamic State link to the attack, spokesman Anton Charliyan said on Metro TV.

MULTIPLE BLASTS

"This may have been influenced by Islamic State, but perhaps not organized by it," said Clive Williams, a former military intelligence officer and visiting professor at the Australian National University's College of Law. "It doesn't seem very well organized.

There were multiple bombings but so far the casualty rate seems pretty low for the amount of effort. They may have been using grenades, which you can acquire in Indonesia."

President Joko Widodo condemned the attack and cut short a trip to west Java to return to the capital. "We are all certainly saddened by the fallen victims from this incident," Mr Widodo, better known as Jokowi, told reporters.

"But we are all condemning this act that disturbs public security, that disturbs public peace and spreads terror among people," he said . "The country, the nation and the people, all of us, must not fear, must not be defeated by this act of terror."

Starbucks said that one customer was injured in the blast at its store near the Skyline building, and all its employees were safe. Starbucks outlets in Jakarta will remain closed "out of an abundance of caution," the company said in a statement.

Hotels in Jakarta stepped up security and said authorities had stationed police and police dogs there.

Central Bank Policy makers at the central bank, located near the explosion site, continued with a scheduled meeting, before announcing that it cut its reference rate to 7.25 per cent from 7.5 per cent.

Police reopened the main thoroughfare by late afternoon, while Asiana Airlines Inc and China Southern Airlines Co said their flights to Jakarta operated normally.

The head of the parliamentary defense commission, Mahfuz Sidik, said the primary targets appeared to have been police. "We need to investigate whether this is a retaliation against a number of arrests done by national police of several people suspected of being involved in terrorism, or if there are other motives," he said.

ISLAMIC EXTREMISTS

Indonesia is the world's most-populous Muslim nation and has been battling Islamic extremists since independence.

The last major attack was in 2009 when twin suicide bombings killed seven people at two luxury Jakarta hotels. The deadliest terrorist attack was in 2002 on the tourist island of Bali, when Jemaah Islamiyah bombed bars and night clubs, killing 202 people, including 88 Australians.

That attack led to a broader crackdown that largely curtailed the group.

"The main worry is that Indonesian fighters suspected of having traveled to Syria and Iraq, may have already returned to the country and begun to organise," Bob Herrera-Lim, managing director of Teneo Intelligence said in a note.

"The problem is that there is no strong data on how many Indonesians have fought in the Middle East -- estimates vary widely from several hundred to a few dozen."

Nearly two dozen suspected militants have been detained in recent weeks, including a number of ethnic Uighurs from China, with explosives, weapons and a suicide vest found, said Keith Loveard, head of political risk at Jakarta-based security company Concord Consulting.

"This attack was long-awaited," he said. "While the counter-terrorism unit Detachment 88 has done a very good job of rounding up suspects, it was almost inevitable that some would slip through the net."

BLOOMBERG