Natasha Khairunisa Amani, Jakarta – Rupiah weakened against the US dollar on Wednesday as escalating geopolitical tensions in the Middle East raised concerns over global oil supply disruptions.

The rupiah closed at Rp 16,892 per dollar in afternoon trading, down 20 points from the previous close of Rp 16,872. Earlier in the session, the currency had dropped as much as 60 points.

Ibrahim Assuaibi, director of Traze Andalan Futures, said the rupiah was pressured as markets reacted to rising risks to global energy supply.

"Traders are weighing supply risks amid the expanding conflict in the Middle East, which began over the weekend when US and Israeli forces launched coordinated strikes on Iran's military that killed Supreme Leader Ayatollah Ali Khamenei," Ibrahim said in a written statement on Wednesday.

He added that the rupiah also came under pressure from concerns that the Strait of Hormuz, a key global oil shipping route, could be closed.

"Threats to Hormuz, a crucial route for crude oil exports from major producers including Saudi Arabia, Iraq, and the United Arab Emirates, have injected a significant geopolitical risk premium into oil prices," Ibrahim said.

Despite the military escalation supporting oil prices, Ibrahim noted that signs of international efforts to secure shipping routes could limit further gains in the near term.

Domestically, the rupiah was also weighed down after Bank Indonesia signaled it was closely monitoring inflationary risks stemming from rising global energy prices while maintaining stability in the currency.

The central bank remained active in the market through Non-Deliverable Forward (NDF) interventions in offshore markets, as well as spot transactions and Domestic Non-Deliverable Forward (DNDF) operations in the domestic market. Bank Indonesia also continued purchasing government bonds (SBN) in the secondary market to stabilize financial markets.

Source: https://jakartaglobe.id/business/escalating-middle-east-conflict-drags-rupiah-to-rp-1689