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| The rupiah weakened to Rp16,990 per U.S. dollar as the Iran-US conflict and rising global oil prices increased pressure on emerging markets and Indonesia’s currency stability. |
JAKARTA -- Rising geopolitical tensions in the Middle East are continuing to put pressure on the Indonesian rupiah. Chief Economist of Permata Bank, Josua Pardede, believes the rupiah may remain near its weakest levels and could weaken further if the conflict involving Iran, the United States, and Israel continues.
Josua explained that uncertainty has increased following leadership developments in Iran. The succession process is unfolding amid ongoing conflict, while political elites in the country are reportedly divided.
In that situation, Mojtaba Khamenei is seen as a figure gaining influence. He is known to have close ties with Iran’s Revolutionary Guard and is often viewed as having a more hardline stance.
“In conditions like this, markets tend to maintain demand for the U.S. dollar and reduce investment in emerging markets, making it difficult for the rupiah to recover quickly,” Josua said when contacted in Jakarta on Monday.
Market pressure was reflected in trading earlier in the week. On Monday, the rupiah briefly touched Rp16,990 per U.S. dollar as global oil prices climbed past $100 per barrel.
According to Josua, stabilization measures taken by Bank Indonesia (BI) are important to maintain orderly market conditions. These policies help contain volatility so the weakening of the rupiah does not occur in a disorderly manner.
However, he noted that such measures may not be sufficient to reverse the trend while external pressures remain strong. Key factors affecting the exchange rate include geopolitical conflicts, rising oil prices, and global capital flows.
Previously, in February 2026, Bank Indonesia decided to keep its benchmark interest rate at 4.75 percent. The policy was aimed primarily at strengthening rupiah stabilization amid global uncertainty.
The central bank has also intensified interventions in the foreign exchange market, both domestically and internationally, to maintain currency stability and ensure market liquidity.
“This means Bank Indonesia’s current policy should be seen as an effort to calm market sentiment and smooth currency movements, rather than guaranteeing an immediate appreciation of the rupiah,” Josua said.
From the perspective of foreign exchange reserves, Josua believes Indonesia still has sufficient buffers. As of the end of February 2026, the country’s reserves stood at $151.9 billion, equivalent to 6.1 months of imports.
This level provides Bank Indonesia with room to stabilize the market if pressures intensify. However, Josua emphasized that the use of foreign exchange reserves must remain measured.
He said the main function of reserves is to reduce volatility and ensure the availability of foreign currency liquidity, not to defend a specific exchange rate level continuously when external pressures remain high.
“In other words, foreign exchange reserves remain strong, but their effectiveness will be greater if geopolitical tensions begin to ease,” he said.
Meanwhile, global oil prices have also become a key factor affecting economic conditions. As long as disruptions in the Strait of Hormuz and attacks on energy facilities continue, oil prices are likely to remain elevated.
Josua believes oil prices could stay above $100 per barrel and remain highly volatile. In fact, the market has already tested levels near $120 per barrel.
He warned that the economic impact of the conflict could last for weeks or even months. Restoring shipping routes and energy production cannot happen instantly.
For Indonesia, the short-term impact on inflation may still be somewhat limited. The government has indicated it will increase energy subsidies and has no immediate plans to raise subsidized fuel prices at least until the Eid holiday.
However, if the conflict drags on, economic pressure could gradually spread to several sectors. Transportation, logistics, food, and imported goods costs could increase.
This situation could weaken household purchasing power and push domestic prices higher. The risk deserves attention, especially as Indonesia’s inflation rate in February 2026 was recorded at 4.76 percent.
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