Who Benefits from the Riots?

by Subhan Yusuf, M.A., observer on geopolitics and public policy

The recent weakening of the Indonesian rupiah cannot be separated from the broader global geopolitical situation. Tensions in the Middle East, uncertainty surrounding the reopening of the Strait of Hormuz, potential disruptions to energy supplies, and changing expectations regarding U.S. monetary policy have placed pressure on the currencies of emerging economies, including Indonesia. On August 27, 2026, the rupiah closed weaker at around Rp17,744 per U.S. dollar as markets closely monitored developments in the Middle East alongside domestic political dynamics in Jakarta.

This situation provides an important lesson. In the global financial system, a country is not assessed solely on the basis of economic growth, foreign-exchange reserves, inflation, the trade balance, or central-bank policy. Markets also assess the degree of political and social uncertainty associated with that country. Therefore, when external pressures are already high, domestic instability is no longer merely a political issue. It can become an economic variable. This is precisely what deserves greater attention from the Indonesian public.

Demonstrations are a democratic right. Governments must provide space for criticism, opposition, and expressions of public dissatisfaction. However, there is a fundamental difference between a demonstration and a riot. Demonstrations communicate demands, whereas riots generate uncertainty. Demonstrations can strengthen political accountability; violence, by contrast, can undermine confidence in political and economic institutions and, indirectly, damage a country's reputation.

When demonstrations remain peaceful and are accompanied by clear demands, economic actors can still anticipate the direction of political developments. However, when demonstrations turn into anarchic actions involving the destruction of public facilities, arson, looting, blockades of economic activities, or constantly shifting demands, markets face a different problem. Investors are no longer asking only about the substance of government policy. Their questions become: Will the conflict expand? Will political uncertainty persist for longer? And, more fundamentally, is society in this country genuinely supportive of development, or is it becoming increasingly prone to impulsive and anarchic behavior?

The Rupiah Is Also Driven by Expectations

The exchange rate of the rupiah is determined by the interaction between the supply and demand for foreign currency, but market participants' decisions are strongly influenced by expectations. When risks increase, investors may reduce their exposure to domestic assets and increase their demand for assets perceived as safer, particularly U.S. dollar-denominated assets.

At the same time, external pressures originating in the Middle East operate through different channels but may ultimately converge at the same point. Tensions around the Strait of Hormuz increase the risks to energy supplies and oil prices. For Indonesia, higher global energy prices can increase pressure on inflation, foreign-exchange requirements, the current account balance, and market expectations regarding monetary policy.

Bank Indonesia itself noted that the rupiah faced pressure in mid-2026 following the escalation of the Middle East conflict and growing expectations of an increase in the Federal Funds Rate. Bank Indonesia subsequently employed various instruments to maintain rupiah stability, including interventions in the NDF, spot, and DNDF markets (Bank Indonesia, 2026).

In other words, when external factors are already exerting pressure, Indonesia needs domestic stability rather than additional uncertainty. This is where anarchic demonstrations become problematic and counterproductive. When demonstrations escalate into riots, they can become a risk multiplier when markets are already operating under risk-off conditions.

Financial markets are inherently forward-looking. Investors do not assess only the conditions that exist today. They attempt to anticipate what conditions may look like several weeks or months into the future. Consequently, anarchic actions can have consequences that extend far beyond the physical damage they directly cause.

The literature on political uncertainty indicates that political uncertainty increases market frictions and influences the behavior of firms, financial institutions, and the broader economy (Dai & Cheng, 2019). Ironically, the segments of society most vulnerable to a weakening rupiah may also be among the first to bear its consequences through higher prices for imported goods, energy, raw materials, and production costs.

A More Serious Problem

Theoretically, every crisis situation creates opportunities for political actors to derive political gains from dissatisfaction that they may not have initially created themselves. Social dissatisfaction can become a source of mobilization exploited by various actors when the political structure creates opportunities for changes in power. Interest groups may also shift public attention away from the substance of a particular policy toward narratives concerning government failure.

I see a pattern here that deserves careful consideration when interpreting these dynamics.

Clear political demands are, in fact, a form of democratic responsibility. When citizens argue that a particular policy should be revoked, they should be able to explain which policy they oppose, why they oppose it, and what alternative they propose.

This becomes even more important when external pressures are already high. The conflict in the Middle East and uncertainty surrounding the Strait of Hormuz are already sufficient to place pressure on energy markets and currencies. Reuters reported that disruptions in the region had also constrained supplies of refined energy products to Asia, while Indonesia was among the countries experiencing a relatively sharp decline in energy-product imports (Reuters, 2026).

When demands become increasingly vague while the intensity of violence increases, we as the public need to pause and ask a fundamental question:

Is this anarchic and violent movement still fighting for a particular policy objective, or has it transformed into a vehicle for generating political instability?