TEMPO.CO, Jakarta - The escalation of conflict following the United States’ and Israel’s attacks on Iran has raised concerns about potential impacts on both the global and Indonesian economies. This concern is particularly heightened as the war has driven a surge in global oil prices.
Susiwijono Moegiarso, Secretary of the Coordinating Ministry for Economic Affairs, explained that Indonesia is unlikely to experience direct effects, as its crude oil and fuel supplies come from multiple regions, not just the Middle East.
He stated, “If we look at it, Indonesia's trade value with the Middle East is not very high. Even considering the Middle East as a whole, we still maintain a surplus,” during a discussion forum held by UOB Indonesia in South Jakarta on Monday, March 2, 2026.
Nevertheless, Susiwijono acknowledged that Indonesia could still be affected by disruptions in the global supply chain. According to his presentation, there are at least five risks the domestic economy could face if the war continues to escalate.
1. Increase in Energy Import Costs
Ongoing supply chain disruptions will push oil prices higher. The 2026 state budget assumed a projected oil price of US$70 per barrel, but it has already exceeded US$80 per barrel.
For every US$1 increase in the Indonesian Crude Price (ICP), energy compensation subsidies would require an additional Rp10.3 trillion. A US$1-per-barrel hike could also raise state budget revenues by around Rp3.6 trillion, yet the budget would still face a deficit difference of roughly Rp6.7 trillion.
2. Inflationary Pressure
Rising oil prices will affect not only energy costs but also the broader global economy, leading to price increases across multiple sectors. This, in turn, drives inflation in Indonesia, as surging prices extend beyond energy to include imported raw materials critical to the national industry.
3. Monetary Tightening
If inflation rises, the central bank may tighten interest rates, which could slow economic growth. Higher interest rates make borrowing more expensive, prompting companies to delay expansion plans and making it harder for individuals to access loans.
4. Investors Turning to Safe Assets
Amid economic uncertainty caused by geopolitical conflict, investors are likely to seek safe-haven assets to mitigate risks. This shift can create pressure on the stock market and the Composite Stock Price Index (CSPI).
5. Weakening Rupiah
Pressure on the CSPI due to capital outflows can weaken the rupiah. When foreign investors withdraw short-term funds, demand for the US dollar rises, leading to depreciation of the rupiah.
Read: Soaring Oil Prices: Challenges Ahead for Indonesia
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