Rupiah Weakens as US-Iran Hormuz Strait Conflict Escalates

The rupiah exchange rate against the US dollar at the close of trading on Tuesday weakened by 106 points, or 0.60 percent, to Rp17,861 per US dollar, compared with the previous close of Rp17,755 per US dollar.

Money market analyst Ibrahim Assuaibi said the rupiah’s depreciation was influenced by US-Iran relations, which dashed hopes for the reopening of the Strait of Hormuz.

“The United States and Iran are both demanding compensation for the recent military attacks, thereby dashing hopes that the two sides were close to an agreement to reopen the Strait of Hormuz,” he said in a written statement in Jakarta on Tuesday.

The two countries were said to have made conflicting claims regarding the status of the Strait of Hormuz. Washington stated that the waterway remains open, while Tehran claimed to have closed the route using mines and drones.

“The Houthi group has threatened to open a new front in the conflict involving Iran by attacking ships and oil infrastructure in the Red Sea. This move increases anxiety over supply disruptions and further drives up crude oil prices,” he said.

Looking at domestic sentiment, pressure on the market was somewhat contained following President Prabowo Subianto’s appointment of Acting Bank Indonesia Governor Destry Damayanti as the sole candidate to replace Perry Warjiyo, easing concerns over leadership.

The Jakarta Interbank Spot Dollar Rate (JISDOR) of Bank Indonesia also weakened today to Rp17,824 per US dollar from Rp17,795 per US dollar previously.