Jakarta. The rupiah depreciated past the psychological Rp 17,000 mark at the start of the week on Monday, pressured by escalating geopolitical tensions and shifting US rate expectations.

The local currency closed down 22 points to Rp 17,002 from the previous close of Rp 16,979 against the US dollar in afternoon trading.

Ibrahim Assuaibi, director at Traze Andalan Futures, said the rupiah’s decline reflects heightened market caution over the risk of conflict in the Middle East.

Markets remain on edge over a potential escalation involving Iran after the Iran-backed Houthi group in Yemen launched attacks on Israel over the weekend. The group could open a new front in the conflict, given its capability to strike targets in the Red Sea.

The rupiah also came under pressure after US President Donald Trump said last week that his administration had extended the deadline for a potential strike on Iran’s energy infrastructure to early April.

Adding to the pressure, US consumer sentiment data pointed to growing pessimism about the economy. The University of Michigan’s March index fell from 55.5 to 53.3, below the 54 consensus estimate.

“Inflation expectations for the next 12 months jumped from 3.4% in February to 3.8%, while the five-year outlook remained unchanged at 3.2%,” Ibrahim said.

Meanwhile, the CME FedWatch Tool now indicates markets are pricing in no US rate cuts this year, with a 50% probability of a rate hike by late 2026, sharply shifting from earlier expectations of two rate cuts before the US-Iran conflict intensified.