Indonesia’s decision on Wednesday to proceed with investigating Jakarta’s popular ethnic Chinese and Christian governor over a controversial allegation of insulting Islam could hurt nearly two decades of peace building between the country’s majority Muslims and its minorities, observers say.

Police officially named Basuki Tjahaja Purnama – commonly known as ‘Ahok’ – as a suspect following a blasphemy complaint brought against him by hardline Islamic groups in the world’s most populous Muslim nation.

Watch: Jakarta rally turns violent as Muslim hardliners attack police

The decision was made after investigators heard testimonies from dozens of witnesses and experts. The case will now go to trial and Purnama has been barred from leaving the country even as he continues a re-election campaign ahead of a vote in February. In Indonesia, being named a suspect in a criminal case signals that prosecutors have enough evidence to press formal charges.

There are concerns that the episode could unravel Indonesia’s fragile social harmony and political stability. The Southeast Asian nation of 250 million people was for decades ruled by dictator Suharto until he was ousted in a popular uprising in 1998. The events that year also involved anti-Chinese riots. The Chinese minority makes up about 10 per cent of the country’s population but wield significant economic clout.

Police name Jakarta’s ethnic Chinese governor a blasphemy suspect, order him not to leave country

“This case will increase political tensions for years to come,” said Marcus Mietzner, an Indonesian politics expert at the Australian National University. “The affair has laid bare how deeply racist and religious sentiments run in Indonesian society, and how easily they can be mobilised politically,” he said.

He added: “Ahok’s case is bad news for any minority candidate who wishes to run in Indonesian elections. They all now have to fear trumped up blasphemy charges as a silver bullet to kill their campaigns.”

And Mustafa Izzuddin, a Southeast Asian politics researcher at Singapore’s ISEAS-Yusof Ishak Institute, said the “trumped up allegations are an illustration of the continued volatility of both interracial and interfaith relations in Indonesia”.

Watch: Hardline Muslims protest against Jakarta governor

Purnama is accused by Islamists of insulting the Koran during a speech on September 27 in an island regency administered by the Jakarta government. The 50-year-old said he merely repeated a verse in the Koran used by opponents to persuade Muslims not to support a non-Muslim like him, but had no intentions of insulting Islam.

Groups like the Islamic Defenders Front insist otherwise, and have urged President Joko Widodo to jail Purnama – a key ally of the Indonesian leader – for blasphemy. Purnama was Widodo’s deputy as Jakarta governor from 2012 to 2014 before the latter triumphed in the 2014 presidential election.

Widodo – also known as Jokowi – has urged restraint but some experts say he is not doing enough to protect Purnama.

Jakarta’s ethnic Chinese leader questioned by police after violent hardline protests

More than 100,000 people marched against Purnama earlier this month in a rally in the capital organised by the Islamic Defenders Front.

“It’s a setback for a democratising country like Indonesia whereby obviously unintended off-the-cuff remarks made during the campaign trail have been taken out of context and magnified by a small but vocal segment of the population,” said Oh Ei Sun, a Southeast Asian politics researcher at Singapore’s S. Rajaratnam School of International Studies.

Oh deplored that “the authorities should even deign to classify him as a suspect instead of offering enhanced protection”.

Officials have said Purnama is free to continue his gubernatorial candidacy as he awaits trial, but there are concerns that the contest in February will now become a combustible proxy battle between secularists who support him and the country’s influential Islamists.

‘He humiliated the Koran’: tens of thousands of Muslims rally to demand Jakarta governor resign over blasphemy

Observers are also keeping a close watch on how Widodo handles the situation. “Jokowi had to distance himself from Ahok to protect his presidency, but he will try to punish the political sponsors behind the Islamist protest that pushed him into a corner,” said Mietzner, the Australia-based Indonesian politics expert.

Mustafa said Purnama’s bid for re-election had “increasingly become untenable”.

“The anti-Ahok demonstration will not rest until he is found guilty of the allegations against him besmirching the Koran,” he said.

But “the fact that Ahok is also a popular governor could result in a push back from his supporters, which could further destabilise the political situation in the capital city and country,” he said.

Purnama, a father of three, was quoted on Wednesday afternoon as telling supporters to remain calm and to “let it be”, hours after police formally named him as a suspect.

Widodo meanwhile urged “all parties to respect the legal proceedings that have been completed and are currently underway”.

“What has been done by the police has met the necessary principles of transparency, fairness and professionalism,” his spokesman said.