TEMPO.CO, Jakarta - Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, has warned that escalating tensions in the Middle East could drive up global fuel prices. The situation has been compounded by disruptions to the Strait of Hormuz, a vital route for international oil trade.
“Fuel prices will automatically rise, similar to the situation during the conflict in Ukraine. However, this time, supply from the United States will increase, and OPEC will also expand its production capacity,” Airlangga said on Monday, March 2, 2026.
He outlined three direct impacts of the U.S.-Israel conflict with Iran for Indonesia: disruptions to oil supply, challenges to logistics and transportation, and effects on the tourism sector.
World oil prices surged again in trading on Monday, extending gains seen at the close of trading on Saturday, February 28, following the U.S.-Israel strikes on Iran.
Fahmy Radhi, a lecturer at the Faculty of Economics, Gadjah Mada University (UGM), said the oil price increase is an inevitable consequence of the conflict.
“If the aggression continues and escalates, I estimate prices could reach around US$100 per barrel,” Fahmy told Tempo on March 2, 2026.
As one of the world’s largest oil importers, Indonesia is vulnerable to such price spikes. Fahmy noted that non-subsidized fuels, such as Pertamax, are less affected since their prices follow global market trends.
The bigger challenge lies with subsidized fuels, including Pertalite and solar. If prices are kept stable for consumers, the government will bear the higher cost, as the state budget currently assumes crude oil at US$70 per barrel. A rise above this level would increase the fiscal burden significantly.
Conversely, raising subsidized fuel prices at the consumer level would fuel inflation.
“The majority of subsidized fuel consumers use Pertalite and solar. This puts the government in a difficult position,” Fahmy said, highlighting the delicate balance policymakers must manage between budgetary pressures and inflation control.
Read: Prabowo Meets Ministers to Discuss Middle East Conflict Impacts
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