Rupiah Sinks to Historic Low as Iran-Israel Clash Roils Asian Currencies

Asian currencies came under heavy selling pressure on Monday, with the Indonesian rupiah bearing the brunt as it tumbled to an unprecedented 18,107 per U.S. dollar. The sell-off was not confined to Jakarta: India’s rupee weakened to 95.35 against the greenback, while the Israeli shekel slumped to 2.97 per dollar, both dragged down by a soaring dollar and a sharp spike in oil prices that saw Brent crude climb 3% to $96 a barrel.

The catalyst was a dangerous new phase in the Iran-Israel confrontation. On Sunday night, Iran launched a volley of missiles into northern Israel, marking a steep escalation after threats to avenge recent Israeli airstrikes near Beirut. The attack drove already elevated oil prices higher on fears that a broader Middle Eastern conflict could disrupt supply. “The rupiah is being hammered by the fresh escalation and the resulting jump in oil,” said Lukman Leong, a currency analyst at Doo Financial Futures.

In Jakarta, the rupiah did not just open weaker; it deteriorated through the morning. Having started at 18,107, it hit 18,134 within minutes and sank further to 18,167 by mid-morning as panic spread. The benchmark Jakarta Composite Index plunged 3.98%, its worst single-day drop in months, after foreign investors rushed to offload equities and convert the proceeds into dollars for repatriation. Analysts warned that the pain could intensify. Ibrahim Assuaibi, an Indonesian economist, forecast that the rupiah could breach 19,000 by the end of June if the geopolitical turmoil persisted and oil stayed at current levels. The central bank and finance ministry pledged tighter coordination to steady the currency, but markets were unimpressed.

Viewed from Mumbai, the rupee’s slide came during a particularly volatile period — it had surged 56 paise on Friday after the Reserve Bank of India rolled out measures to boost dollar inflows — but geopolitical headwinds quickly erased those gains. In Tel Aviv, the shekel’s sharp reversal after months of strength raised immediate concerns about imported inflation and the central bank’s interest-rate path, with the dollar trading near 2.97 shekels and the euro breaching 3.45.

The episode underscores how swiftly confidence can evaporate in emerging markets when global flashpoints flare. With no sign of de-escalation and crude prices threatening to climb further, traders are bracing for a prolonged bout of volatility. The fate of the rupiah, analysts caution, now hinges on whether the Middle East crisis can be contained — or whether a wider conflagration forces a wholesale re-pricing of risk in Asia’s fragile economies.