Jakarta. Rupiah weakened sharply to Rp 17,926 per US dollar on Wednesday as rising global oil prices, escalating geopolitical tensions in the Middle East, and growing domestic demand for foreign currency weighed on the Indonesian currency.

Currency observer Ibrahim Assuaibi said the rupiah came under pressure as investors flocked to the US dollar, traditionally viewed as a safe-haven asset, amid intensifying tensions involving Iran and Israel.

“Today, the rupiah weakened again due to rising global crude oil prices. WTI climbed to $94.58 per barrel, while Brent crude rose to $96.72 per barrel,” Ibrahim said on Wednesday.

He said stalled negotiations between the United States and Iran had heightened uncertainty in global markets, fueling concerns over energy supply disruptions and keeping oil prices elevated.

The rise in oil prices poses a direct challenge for Indonesia, which remains heavily reliant on energy imports. A more expensive oil market increases the country's import bill and adds pressure on the rupiah.

Higher energy prices could also keep US inflation elevated, reducing the likelihood of imminent monetary easing by the Federal Reserve.

“There are still indications that the Fed could raise interest rates once more in 2026 if inflationary pressures fail to subside,” Ibrahim said.

Domestic factors have also contributed to the rupiah’s decline. Ibrahim said demand for US dollars has increased due to energy imports, corporate dividend payments, and maturing external debt obligations.

At the same time, some investors and households have begun shifting funds into foreign currency-denominated assets as a hedge against further rupiah depreciation, adding pressure to the domestic foreign exchange market.

To preserve economic stability and protect household purchasing power, Ibrahim said the government should ensure the availability of goods, particularly imported commodities that are vulnerable to exchange-rate fluctuations. He also stressed the importance of targeted social assistance programs to support consumption.

Looking beyond short-term measures, Ibrahim called for faster industrialization, stronger development of the blue economy, and higher productivity in the agricultural sector to bolster Indonesia’s economic resilience.

“We need to accelerate industrialization and develop the blue economy because around 50% of Indonesia’s economic growth is still supported by household purchasing power,” he said.

He also urged the government to speed up digital transformation and streamline investment regulations to attract more foreign capital, arguing that stronger economic fundamentals would help support rupiah stability over the medium and long term.