Indonesian Rupiah weakens amid Middle East tensions and rising import costs

The Indonesian Rupiah has experienced significant weakening, driven by geopolitical tensions in the Middle East and rising domestic production costs. On August 11, 2026, the currency fell 0.60 percent to Rp 17,861 per USD. Analysts attribute this decline to heightened instability regarding the Strait of Hormuz, following conflicting claims between the United States and Iran over the waterway's status. Additionally, Houthi attacks on Saudi Aramco's Jazan refinery and threats against Red Sea oil infrastructure have fueled supply concerns.

Domestically, the currency depreciation is severely impacting small-scale food producers. Tempeh manufacturers in Indonesia are facing a crisis due to the rising cost of imported soybeans from the United States. Ahmad Saikhu, secretary general of a tempeh producers association, reported that members are being forced to reduce product sizes to remain viable. He warned that if the situation persists for three to six months, many businesses could face bankruptcy, potentially leading to widespread unemployment.