Rupiah weakens as US-Iran conflict escalation intensifies

Investors are bracing for potential escalation in the Middle East ahead of the deadline set by US President Donald Trump for Iran to reopen the Strait of Hormuz.

Jakarta (ANTARA) - The rupiah exchange rate closed lower on Tuesday’s trading by 70 points or 0.41 percent to Rp17,105 per US dollar from the previous close at Rp16,980 per US dollar.

Currency and commodity analyst Ibrahim Assuaibi said this weakening was influenced by the potential escalation in the Middle East between the US and Iran.

“Investors are preparing for potential escalation in the Middle East ahead of the deadline set by US President Donald Trump for Iran to reopen the Strait of Hormuz. Disruptions to tanker traffic in recent weeks have tightened supply expectations and increased risk premiums across oil markets,” he stated in a written comment in Jakarta on Tuesday.

Iran has rejected a US proposal for a 45-day ceasefire and the gradual reopening of the Strait of Hormuz, alongside broader negotiations on lifting sanctions and reconstruction.

“Trump has reiterated that Tuesday’s deadline is firm and warned that failure to comply could trigger US strikes on Iranian infrastructure, including power plants and bridges. He also stated that Iran could be eliminated quickly, underscoring the rising risk of broader escalation,” said Ibrahim.

This confrontation is seen to have disrupted global energy flows and driven oil prices higher, triggering inflation concerns and complicating monetary policy prospects.

Investors are also awaiting key US inflation data to be released on Friday, which is expected to provide clues on the Federal Reserve’s interest rates.