Rupiah predicted to weaken amid escalating US-Iran tensions

The Rupiah is projected to weaken today within the range of Rp17,950 to Rp18,050, influenced by the global rise in oil prices resulting from the escalating conflict between the US and Iran.

Rully Nova, an analyst at Bank Woori Saudara, predicted that the Rupiah would weaken due to the heating relations between the US and Iran, which has led to an increase in global oil prices. Speaking in Jakarta on Friday, he noted that the escalation of this conflict is a primary driver for the currency’s downward pressure.

Citing Anadolu, the Iranian government has stated that the reopening of the Strait of Hormuz depends on the US’s willingness to provide “objective guarantees” to end the war across all fronts and to fulfil commitments based on a seven-day diplomatic initiative proposed by Tehran. Tehran is also demanding the release of frozen Iranian assets, the lifting of blockades, the removal of oil restrictions, and an end to the maritime blockade.

The US has recently announced a series of new sanctions against Iran, targeting the railway and automotive sectors, as well as a shadow banking network allegedly linked to Russia. The US Treasury Department has imposed sanctions on Iran’s two largest car manufacturers, Iran Khodro and SAIPA, along with several of their subsidiaries, as well as the state-owned Islamic Republic of Iran Railway Company and two other railway firms.

Furthermore, the US has placed Iran’s automotive and railway sectors on a sectoral sanctions list, allowing US authorities to target any entities or individuals operating within these industries.

According to Rully, other sentiments are being influenced by changes within the government cabinet, particularly regarding the management of energy and commodities. He noted that these changes significantly affect the trade balance.

As previously reported, President Prabowo Subianto has inaugurated Bahlil Lahadalia as the Coordinating Minister for Downstreaming and Energy Transition, concurrently serving as the Minister of Energy and Mineral Resources. Bahlil stated that the new ministry will act as a coordinator for relevant ministries and agencies, including the Ministry of Investment and Downstreaming, to achieve national targets.