Jakarta. Rupiah weakened 34 points against the US dollar on Friday, closing at Rp 17,897 per dollar as escalating tensions in the Strait of Hormuz stoked fears of higher oil prices and reinforced expectations that the Federal Reserve could raise interest rates next month.

Indonesian currency fell from the previous close of Rp 17,863 per dollar.

Ibrahim Assuaibi, director of Traze Andalan Futures and a currency analyst, said the rupiah came under pressure amid uncertainty over the latest developments in the conflict involving the United States and Iran.

Iranian media reported that Tehran had attacked what it described as "hostile targets" in the Strait of Hormuz and planned to bar US and Israeli vessels from passing through the strategic waterway.

The latest escalation came after Iranian officials said an agreement with Oman aimed at reopening shipping routes was nearing completion.

"The renewed tensions in the Strait of Hormuz have raised concerns over a potential surge in crude oil prices, prompting markets to anticipate inflationary pressure that could lead the Federal Reserve to raise interest rates," Ibrahim said on Friday.

"Markets are now pricing in around a 60% chance of a September rate hike, following a Financial Times report that Federal Reserve Chair Kevin Warsh is prepared to raise borrowing costs if inflation remains elevated in the coming weeks," he added.

Domestically, Ibrahim said the rupiah weakened despite Indonesia's foreign exchange reserves remaining relatively stable at $145.3 billion at the end of July, compared with $145.6 billion a month earlier.

"The July 2026 reserve position was mainly supported by tax and services receipts, as well as the government's global bond issuance, amid external debt repayments and Bank Indonesia's rupiah stabilization measures," he said.

Other major currencies traded against the rupiah were the Singapore dollar at Rp 13,955, the Japanese yen at Rp 112.99, the Australian dollar at Rp 12,593, and the euro at Rp 20,611.

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