Rising oil above $100 fuels bond sell-off and pressure on Indonesia’s rupiah
Oil prices breaking $100 a barrel have triggered a fresh sell-off in global bonds and heightened inflation worries, especially for Indonesia.
Global bond markets experienced renewed volatility on September 10-11 as oil prices climbed past the $100 per barrel mark, a development linked to intensified fighting between the United States and Iran. U.S. 10-year Treasury yields rose toward 5%, while the 30-year yield reached its highest level since 2007, raising the probability of a Federal Reserve rate increase above 70% for the September 16 meeting. The higher oil price is expected to stoke inflation, forcing central banks to keep interest rates elevated longer.
In Indonesia, the impact is twofold: the rupiah faces downward pressure and the country’s daily import of about one million barrels could increase annual foreign-currency requirements by roughly $3.6 billion for each $10 rise in oil price. These dynamics could raise borrowing costs for businesses and consumers alike.
Why it matters
Higher oil prices can spark global inflation and strain Indonesia’s economy through a weaker rupiah and costlier borrowing.
How this story developed
- Aug 19 Fed officials warn higher rates may be needed if inflation stays elevated
- Sep 7 Iran claimed to have hit an unmanned U.S. vessel in the Strait of Hormuz, which the U.S. dismissed as false.
- Sep 8 Iran announced it will double the price of fuel consumed beyond its quota.
- Sep 8 Iran’s Fars news agency reported an explosion heard in the southern Jask area off the Gulf of Oman and east of the Strait of Hormuz.
- Sep 9 The buyback size was increased from $4 billion to $6 billion.
- Sep 10 Oil prices have risen above $95 a barrel amid renewed Middle‑East tensions.
- Sep 10 New reporting highlights a sharp inflation jump and rising fuel costs, reinforcing expectations of a deposit‑rate increase.
- Sep 10 The ECB implemented a 0.25‑point rate increase across its three principal rates.
- Sep 11 Asian stock markets fell on Friday, mirroring Wall Street losses, while Brent crude rose above $108 a barrel as geopolitical strains between the United States and Iran intensified.
- Sep 11 Fed minutes revealed a 9‑3 vote to keep rates near 3.6% and a drop in market odds for a September hike to about 67%.
- Sep 11 August US CPI held steady at 3.4% year‑over‑year and core CPI fell to 2.4%.
- Sep 12 Oil prices rose to just below $109 a barrel as Middle‑East tensions escalated.
- Sep 12 Rough’s production licence is set to expire in April, ending extraction at the site.
- Sep 12 Markets priced in a strong chance of another quarter‑point hike in December.
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