Indonesia’s central bank governor ​stepped down on Monday, in a surprise move that deepens uncertainty as the country grapples with a weakening currency and other economic woes brought on by the Middle East war.

President Prabowo Subianto has accepted the resignation of Perry Warjiyo, who had served as Bank Indonesia’s (BI) governor since 2018, State Secretary Prasetyo Hadi told reporters in Jakarta.

Warjiyo, whose second term was meant to expire in 2028, cited unspecified personal reasons for the surprise resignation, which he tendered on Saturday.

The bank’s senior deputy governor, Destry Damayanti, has been appointed interim governor, said Hadi.

The rupiah weakened as much as 0.36% to 18,000 to the U.S. dollar following the announcement, while the main stock index flipped between gains and losses in choppy trade.

The stock market and currency remained “quite stable” in the hours after the government announced Warjiyo’s resignation, Bank Central Asia chief economist David Sumual told Agence France-Presse (AFP).

But the move “may cast further policy uncertainty, which may not translate well to the rupiah and the economy in general.”

The rupiah has taken a battering from surging energy costs, shedding about 7% since the Middle East conflict erupted in February to become Asia’s worst-performing currency, according to financial outlet Bloomberg News.

BI surprised markets last week by ⁠keeping policy ​rates unchanged, instead offering new incentives to attract foreign capital inflows aimed at supporting the rupiah.

The bank has lifted its key interest rate by 100 basis points this year to 5.75% in an effort to shore up the rupiah.

Deni Friawan, a researcher at the Jakarta-based Center for Strategic and International Studies, said Warjiyo’s surprise resignation could spook investors.

“Markets dislike surprises,” he told AFP.

“When a central bank governor steps down unexpectedly, investors naturally question the future direction of monetary policy, inflation control, and exchange rate management.”

Replacement closely watched

Warjiyo, who started his career at BI in 1984, was first appointed as governor in 2018. He was reappointed for a second five-year term by Subianto’s predecessor in ​2023.

Analysts say the choice of Warjiyo’s permanent replacement will be closely watched.

“Given the current environment of heightened uncertainty, policymaking experience and credibility should be key in picking a successor,” said Sumual.

To Friawan, “if the appointment is perceived as politically driven, investors may begin to question the institution’s credibility. And that is a far more serious risk than the resignation alone.”

The appointment of a new governor would involve both the president and the parliament. The president will submit his nomination to the parliament for a “fit and proper test” before the parliament gives its approval.

“The president has not yet proposed the nomination,” Hadi said.

The government urged market participants to remain calm during the transition period. The appointment process would be carried out transparently and accountably and would not disrupt monetary ​policy or economic stability, it said in ​a statement.

Damayanti, who was a commissioner at the ⁠Indonesia Deposit Insurance Corp. and previously the chief economist at Bank Mandiri before joining BI’s board, said the central bank “will always ensure the continuity of its duties and authorities” to maintain the stability of the rupiah and financial system to achieve an economic environment that is ​conducive for growth.

Rating agencies Moody’s and Fitch cited concerns regarding changes in Bank Indonesia’s mandate as among key drivers of their credit rating ​outlook cut to “negative” earlier ⁠this year.

However, rival rating agency S&P this month kept its Indonesia rating outlook “stable” and said BI has had a level of operational independence since July 2005 that was roughly in line with regional peers, and it did not expect BI’s changing mandate to drastically affect such independence. All three rated Indonesia’s debt at the second-to-lowest investment grade.

Southeast Asia’s biggest economy is a net oil importer, but the government has insisted on leaving the price of heavily subsidized fuel unchanged despite mounting pressure on the public purse.

Consumer prices rose 3.34% in June, and growing economic strain triggered student protests demanding the government stop excessive spending, including on its billion-dollar free-meals scheme, which has since been cut back.

Critics also hit out at a government decision to raise the non-subsidized fuel price by a third.

Indonesia’s stock market has lost about a third of its value in 2026, and its stock exchange has been rattled by the threat of a downgrade by stock market compiler MSCI.

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Global shares were mostly higher Monday and oil prices slipped nearly 7% as the U.S. and Iran paused strikes over the weekend following two weeks of attacks while discussing a possible return to negotiations on an interim cease-fire deal.

The Pentagon did not respond to questions about the pause in attacks on Iranian coastal areas and infrastructure after nearly two weeks of escalating fighting sparked by Iran’s firing at ships trying to transit the Strait of Hormuz.

But markets reacted with relief. U.S. futures surged early Monday and the price of a barrel of Brent crude, the international standard, dropped 6.8% to $85.49.

U.S. benchmark crude dropped 7% to $83.06 per barrel.

“Oil’s sharp retreat at the Monday open did more than knock a few dollars off the barrel. It loosened the geopolitical knot that had been tightening around equities, currencies, bonds and central banks for most of July,” Stephen Innes of SPI Asset Management said in a commentary.

Brent had reached $100 per barrel as the conflict, ​which reduced oil shipments via the Strait of Hormuz, spilled over to the Red Sea, hindering exports from the world’s top ​exporter, Saudi Arabia, via the Bab el-Mandeb Strait to Asia.

Fewer than 10 commodity vessels passed through the Strait of Hormuz daily during the weekend, shipping data from Kpler showed.

“Any rebound in flows through the Strait of Hormuz is likely to prove slow and partial, as many shippers remain wary and will want greater confidence in their safety before they bring ​more empty ships into the ​Strait,” MST Marquee analyst ⁠Saul Kavonic said.

In addition, ship traffic through the Bab el-Mandeb Strait fell on Sunday after Yemeni Houthis attacked Saudi oil installations along the Red Sea coast, although a third Chinese supertanker ​exited via the Bab el-Mandeb Strait. Societe Generale analysts estimate that each month without a ​resolution in the ⁠Red Sea would add at least $10 a barrel to the oil price.

Some analysts expect markets will remain supported if crude supplies continue to be disrupted by ongoing shipping risks in the Middle East and Russia’s war on Ukraine.

“As the Middle East conflict ⁠widened ​to the Red Sea and Ukrainian drones struck Russian ships and refineries… ​sustained (supply) disruption would likely keep oil prices elevated and continue to pose upside risks to global inflation,” UOB analysts said in a note.

Ukraine said it ​hit several Russian oil sites over the weekend.

Chinese chipmaker CXMT soars

Meanwhile, shares in Chinese memory chipmaker CXMT soared 466% on Monday as they began trading on Shanghai’s technology board. The company jumped to become China’s most valuable listed company with an estimated market capitalization of 3.3 trillion yuan (nearly $490 billion).

In early European trading, Germany’s DAX gained 1.6% to 25,497,42 and the CAC 40 in Paris was up 0.8% at 8,436.94. Britain’s FTSE 100 rose 0.5% to 10,784.00.

The futures for the S&P 500 and Dow Jones Industrial Average were up 1%.

In Asian trading, Japan’s benchmark Nikkei 225 rose 0.5% to 64,931.19, while the Kospi in South Korea advanced 1% to 6,755.75.

Hong Kong’s Hang Seng climbed 1% to 25,207.18, while the Shanghai Composite index gained 1.2% to 3,858.25.

In Australia, the S&P/ASX 200 surged 1.4% to 8,894.00.

Taiwan’s Taiex slipped 0.1% and the Sensex in India added 1.1%.

On Friday, the S&P 500 barely budged, picking up less than 0.1% and notching its second straight losing week for the first time since March.

The Dow industrials rose 0.5%. The Nasdaq composite index slipped 0.6%, weighed down by sharp losses for heavyweights like Micron Technology, which fell 7%, and Broadcom, which lost 2.7%.

Recent surges in energy prices and fresh tariffs announced last week by the administration of U.S. President Donald Trump could result in hotter inflation, which has been squeezing consumers and looming over the Federal Reserve’s (Fed) interest rate policy.

The Fed meets this week, though rising inflation has dashed hopes for an interest rate cut anytime soon. Wall Street has been leaning toward a potential rate hike to tamp down higher prices.

Higher energy costs are taking up a bigger share of household budgets, which have shifted toward more basic needs, like gasoline.

In the U.S., a gallon of gasoline costs $4.11, according to AAA. That is still lower than this spring as the conflict in Iran expanded, but almost a dollar higher than last year at this time.

“Oil is the fastest-moving tax in the global economy,” Innes said.

When crude rises sharply, consumers feel it at the fuel pump, airlines and transport companies feel it in their operating costs, manufacturers feel it in their logistics, and central banks begin worrying that the initial supply shock will spill over into broader inflation expectations,” he noted.

Meanwhile, corporate earnings reports are focusing attention on the sustainability of broader profits from a boom in spending on artificial intelligence.

Tech giants like Alphabet and Nvidia have been spending heavily to expand AI capacity and investors increasingly are questioning whether they will generate profits to justify the massive stock values that have pushed markets higher throughout the year.

In other dealings early Monday, the U.S. dollar slipped to 163.56 Japanese yen from 163.64 yen. The euro rose to $1.1399 from $1.1398.

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U.N. chief Antonio Guterres called on Sunday for an immediate removal of all sanctions imposed on Syria during the era of former ruler Bashar Assad, as he concluded a two-day visit to the country.

“I welcome steps that have eased sanctions and the opening of new possibilities for economic recovery, but all these sanctions must be removed immediately,” Guterres told a news conference in Damascus.

Syria’s new authorities, who took power in December 2024, are trying to turn the page after more than 13 years of war, and to reboot the economy and rebuild infrastructure and institutions.

Western countries, including the U.S., have begun lifting economic sanctions on Syria. But investors have remained cautious, as the World Bank has estimated the country’s post-war reconstruction could cost $216 billion.

“The United Nations stands with the people of Syria at this pivotal moment. And I came carrying the strongest possible appeal to the international community, an appeal to spare no effort to support the Syrian people and to support the Syrian government,” Guterres said.

“Syria today is at a crossroads,” he added.

Guterres is the first U.N. chief to visit Syria since his predecessor Ban Ki-moon in 2009, two years before the start of Syria’s war, which killed half a million people.

“Syria needs investment in its people, its economy and its institutions. Syria needs support to restore essential services, rebuild infrastructure, revive livelihoods,” he said.

It also needs help “for the safe, voluntary and dignified return of refugees and internally displaced people,” he added.

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The potential breakup of the major German battery manufacturer Varta is seen as a problem for the entire industry in the country, according to the battery expert Dirk Uwe Sauer.

A creditor group led by Deutsche Bank and the financial investors RBC BlueBay, Blantyre and Whitebox announced earlier this week that it intends to spin off the well-known household battery business from the Varta Group, blaming the company’s strained financial situation.

On Friday, Varta confirmed it had filed for preliminary insolvency under self-administration, in a bid to secure its economic future.

“There are only a few companies like Varta in Germany,” said Sauer, a professor at RWTH Aachen University.

“If the company’s profit center is carved out, the question is how future innovation will be financed,” he said.

Varta said the insolvency filing was intended to enable the sustainable continuation of its business operations.

“Technologically speaking, what Varta does is very good,” said Sauer. Ultimately, however, it all comes down to price.

That, he argued, reflects a broader challenge facing Germany’s battery industry.

“We don’t have large-scale manufacturing,” Sauer said. By contrast, China has built up massive production capacity, triggering intense price competition.

“We’ve known for a long time that we’re heading into this dilemma of dependence on China,” he said.

Sauer nevertheless sees promise in Varta’s work on sodium-ion batteries, an emerging technology that could help Europe diversify its battery supply chain.

“Sodium-ion batteries represent a real opportunity for Europe to reduce its dependence on China, because the raw materials required for them are more readily available on the global market,” said Sauer.

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The U.S. Federal Reserve (Fed) is set to convene its second policy meeting under Chair Kevin Warsh starting Tuesday, with markets expecting interest rates to remain unchanged as officials weigh persistent inflation risks, including potential pressures from President Donald Trump’s renewed conflict with Iran.

Warsh was chosen to lead the U.S. central bank by Trump, who has made his demand for lower interest rates clear as he has exerted unprecedented pressure on the independent monetary policymaking body.

After two days of closed-door sessions, the Fed’s open market committee (FOMC) will announce its decision on Wednesday at 2 p.m. (6 p.m. GMT), followed by a news conference by Warsh.

Most investors expect the Fed to hold rates steady at 3.50%-3.75% range for the fifth straight meeting, according to CME’s FedWatch monitoring tool.

U.S. consumer inflation eased to 3.5% on an annual basis last month, but remains far higher than the Fed’s long-term 2% target, which it has not achieved for more than five years.

Since last week, a ramping up of hostilities has seen intense U.S. strikes and Tehran’s retaliatory action targeting Washington’s allies across the region, while Yemen’s Houthis have also threatened to blockade the Red Sea oil trading route.

The fighting has sent energy prices soaring once more, with the benchmark oil futures contract breaching $100 per barrel for the first time since late May, when energy prices were on the downward path.

At the Fed, policymakers have been losing patience with persistent inflation, indicating that a rate hike may be near.

The Fed “has to be ready to tighten monetary policy to prevent a repeat of the 2021-to-2022 inflation episode,” Fed Governor Chris Waller said last week.

“Sternly staring at inflation until it melts before our withering gaze is not an option.”

‘Hawkish core’

Since taking office, Warsh has vowed to reduce or eliminate the amount of forward guidance the Fed provides on its decision-making process, a move that has received mixed reactions.

The new chair has said that providing forward guidance locks policymakers into positions that they may need to change. Some analysts, however, argue that opacity in decision-making creates more uncertainty for markets.

In public statements since taking control of the Fed, Warsh has said he has a “resolute commitment” to delivering price stability, but has not offered details on how and when he thinks it would be appropriate to act.

The Fed has a dual mandate to keep inflation to its long-term target while also delivering maximum employment.

Its main tool to achieve this is the economy’s key interest rate – raising rates tends to curtail economic activity and high prices, while lowering them encourages hiring and investment but can also stoke inflation.

The U.S. labor market has largely stabilized, with steady unemployment despite zigzagging job growth, leaving policymakers mostly focused on inflation.

“‘Resolute commitment’ is, in my opinion, insufficient to tighten monetary policy and curb any inflationary pressures,” said Gregory Daco, chief economist at EY-Parthenon.

With Warsh largely remaining silent, several other policymakers have been vocal about their concern over high prices and the potential need for action in the near term.

“When you create a vacuum, it’s oftentimes the case that the vacuum gets filled,” said Daco.

With headline inflation dipping in June, ahead of further rises expected ahead, analysts say they do not expect a rate hike at this meeting, but that the decision will likely see some dissenting voices.

“We may have a new chairman, but the old guard is now worried about where the economy has moved since the beginning of the year,” Diane Swonk, chief economist at KPMG, told Agence France-Presse (AFP).

Inflation has been under pressure not just from rising fuel prices due to the war, but also due to heightened demand from the AI boom and the continued effect of Trump’s tariffs rippling through the economy.

“The hawkish core of the Fed has not only hardened, but it’s broadened,” said Swonk, who expects two rate hikes later this year.

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U.S. President Donald Trump did not wait long, nor did he pursue lengthy tariff investigations when he returned to office last year, opting instead to pressure trading partners into making concessions right away.

What followed was a chaotic start to a trade agenda that was eventually upended by a stinging Supreme Court defeat this year.

Now he and his team are moving ⁠into a new phase to build a more durable U.S. tariff wall using more ⁠traditional and court-tested trade laws, those he appeared to have little patience for 18 months ago.

His latest global tariff salvo – duties of 10% or 12.5% on 60 countries over allegedly weak enforcement of forced-labor bans – marks the first of numerous tariff actions to be unveiled in the months ahead.

They include probes into excess industrial capacity, alleged intellectual property ​theft by Vietnam, and national security protections for strategic industries from semiconductors to robotics and industrial machinery.

“We’re at the end of ​the ⁠beginning of the Trump tariff agenda,” said Dan Ujczo, associate general counsel at Canadian oil producer Cenovus Energy, who specializes in U.S.-Canada trade.

“Within the next few weeks, and certainly by the end of the summer, we will see large parts of President Trump’s trade policy fully in effect.”

This could bring more clarity and certainty for businesses on Trump’s ultimate tariff structure, along with dread in foreign trade ministries that they may have to cough up more concessions to protect access to a $3.4 trillion U.S. import market.

Direct replacements

Trump’s new anti-forced labor duties imposed under Section 301 of the Trade Act of 1974, the unfair trade practices statute used against China during his first term, almost directly replace a global 10% temporary tariff that expired on Friday.

They cover 99.4% of U.S. imports, the U.S. Trade Representative’s (USTR) office said.

This rebuilds part of Trump’s signature “Liberation Day” tariffs of 10%-50% on nearly every country, which the U.S. Supreme Court struck down as illegal under an untested national emergencies law Trump used to impose them.

Another part of the baseline tariffs is likely to be rebuilt by another Section 301 investigation into excess industrial capacity, targeting 16 big trading partners, including China, the EU, Japan, South Korea, Mexico and Vietnam. That ongoing probe targets industrial subsidies and other export-focused policies.

Amid a wider uproar over Trump’s move, some viewed it as largely maintaining the status ⁠quo.

Mark ⁠Bissell, CEO of Michigan-based vacuum maker Bissell Inc, said the newest tariffs were largely what the company anticipated and it hadn’t frontloaded inventory from China and elsewhere to try to beat them.

“We continued to run the business based on the belief that the tariffs would stay in the 10%-15% range,” Bissell said in an email to Reuters.

Budget impact

Trump’s gamble on quick but untested tariffs right out of the gate did four things. It heaped added costs onto retailers and other import-dependent industries; it brought dozens of trading partners to the negotiating table, yielding concessions for lower rates; it prompted swift retaliation and tariff escalation from China that led to a delicate truce; and it filled U.S. fiscal coffers with hundreds of billions of dollars.

The Liberation Day tariffs alone yielded $166 billion in revenue, a major offset to a growing federal deficit, but refunds to importers have now turned those collections negative.

The 150-day temporary tariffs, based on a law meant to quell balance-of-payments crises, have added $31 billion in assessed revenue through July 5. But if a federal court ruling against them stands, that money, too, is ⁠subject to refund.

With U.S. public debt approaching $40 trillion, Josh Lipsky, chair of international economics at the Atlantic Council, said subsequent administrations may become addicted to tariff revenue that is likely to be sustained.

“The tariff wall is being rebuilt strong brick by strong brick, and it’s very durable,” Lipsky said.

Trump’s broad use of Section 301 in the forced-labor case prompted an immediate legal challenge by small businesses, but trade and legal experts say this will take ​time to play out.

The statute has a solid track record in the courts, and judges may be reluctant to enjoin actions aimed at curbing forced labor and lowering barriers to U.S. ​goods.

More to come

U.S. Trade Representative Jamieson Greer made clear this week that Trump will use everything at his disposal to erect tariffs to reshore production and shrink the trade deficit.

“The specific authorities this administration is using have changed, but the trade strategy has not,” Greer told the U.S. Senate Finance Committee.

Greer, who has not committed to a ⁠timeline for the industrial capacity ‌investigations, has said the ‌layers of tariffs being rebuilt will not exceed caps included in deals he has been negotiating, including 15% for the EU, ⁠Japan and South Korea and higher rates for Southeast Asian countries.

Administration officials say even though China is viewed as the ‌world’s largest source of excess manufacturing, its rates will not exceed the cap of about 20% agreed by Trump and Chinese President Xi Jinping last November, which is on top of the 25% tariffs from his first term.

Some nominal – or ​announced – duties may be higher than actual applied rates, which analysts ⁠say may be an enforcement mechanism for countries to stick to agreed trade deal terms.

Still, some things continue to come out of ⁠the blue, including the 50% duties on Canadian beer, dairy, hockey sticks and other products Trump announced on Monday over Ottawa’s refusal to make trade concessions, and his threat to cut ⁠off all trade with Spain over not meeting NATO ​military spending targets.

That proclivity for spontaneous tariff announcements remains an ongoing risk, said Eswar Prasad, a trade professor at Cornell University and former head of the International Monetary Fund’s (IMF) China department.

“Trump’s eagerness to impose tariffs to address a whole range of grievances will not only continue disrupting the global trading system but will have significant adverse effects on American households and businesses.”