Hormuz Reopens, Gold Prices Jump

RRI.CO.ID, Jakarta - Hope is growing that the Strait of Hormuz will reopen soon. The US President said talks were constructive and moving in a positive direction.

Most Asian stock markets moved higher after the news. Indonesia’s stock index, the IHSG, also opened stronger at 6,187.

News about the reopening pushed oil prices lower. WTI crude fell to around $92 per barrel, while Brent dropped to about $99 per barrel.

Lower oil prices are seen as positive for Indonesia’s financial markets. However, the Indonesian Rupiah weakened sharply to around 17,710 per US dollar.

Another source of pressure on the Rupiah came from the US central bank. The US Senate approved Kevin Warsh as Federal Reserve Chair to replace Jerome Powell.

Investors believe the Federal Reserve could become more dovish under Warsh’s leadership. Still, recent US economic data suggest interest rates may stay high for now.

Higher oil prices in recent months have increased inflationary pressure in the United States. Because of this, the Fed is expected to keep interest rates steady in the short term.

At the same time, the US Dollar Index weakened to 99.02. This shows markets expect more accommodative monetary policy from the Fed in the future.

Even with a weaker dollar, the Rupiah has not strengthened yet. Meanwhile, global gold prices surged to $4,567 per troy ounce, or about 2.6 million rupiah per gram.

The reopening of the Strait of Hormuz is expected to support the rise in gold prices. Expectations of lower interest rates and slowing inflation also increased demand for gold.

Writer: Gunawan Benjamin (Economist, Islamic University of North Sumatra)