Indonesia on High Alert as US Strikes Iran, Oil Prices Surge
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Indonesia faces economic challenges as US military action in Iran drives up oil prices. Experts urge immediate action to stabilize the Rupiah and revise energy subsidies.">
Jakarta – The escalating conflict between Israel and Iran, now involving direct US military intervention with attacks on Iranian nuclear facilities, has triggered serious concerns in Indonesia. Economists are warning of significant economic repercussions and urging immediate goverment action.
Economists Urge Swift Action to Mitigate Economic Impact
Andalas University economist Syafruddin Karimi emphasized the urgency for Indonesia to address the potential economic fallout. He stated that the conflict’s impact extends beyond the middle East, threatening the economic and geopolitical stability of developing nations, including Indonesia. Karimi called for immediate emergency measures to counter the anticipated surge in global oil prices.
did you Know? the Strait of Hormuz, a critical chokepoint for global oil supplies, sees approximately 21 million barrels of crude oil pass through it daily, representing around 21% of global petroleum consumption[[EIA]. Any disruption there could send prices soaring.
Karimi highlighted that Indonesia’s reliance on energy imports would create a significant fiscal burden if oil prices exceed $100 per barrel. Since June 10, 2025, Brent crude oil prices have already jumped 18%, reaching a nearly five-month peak of $79.04 on June 19, 2025, following the Israeli strikes Nasdaq.
“Delaying the revision of the energy subsidy policy will only worsen the state budget deficit,” Karimi warned.
Rupiah Stabilization and Inflation Concerns
Experts also suggest that Bank Indonesia and the Ministry of Finance must enhance their coordination to stabilize the Rupiah. The current global instability could trigger capital outflows, putting downward pressure on the exchange rate and fueling inflation.
Pro Tip: Monitoring the Jakarta Interbank Spot Dollar Rate (JISDOR) can provide insights into the Rupiah’s performance and potential intervention points for Bank Indonesia.
“Monetary intervention must be accompanied by sharpening policy communication so that the market remains calm,” Karimi added.
Economic Growth at Risk
Bhima Yudhistira, Executive Director of the Center for Economic and Law Studies (Celios), echoed these concerns, noting that the widespread Middle East conflict could significantly drive up oil prices. Higher fuel import costs will likely cause government-regulated price inflation to surge, especially when consumer purchasing power is already weak.
“This is not a good inflation; once the price of fuel rises, forwarded to business actors and consumers makes the growth of household consumption slowed down,” Bhima explained.
A prolonged war could jeopardize Indonesia’s 5% economic growth target, with the external environment posing significant challenges, compounded by government budget inefficiencies.
“the projection if the war lasts longer, the Indonesian economy will only grow 4.5% year on year this year. The more severe to reach the target of 8% of economic growth because the external situation is too heavy,” he said.
| Factor | Potential Impact | mitigation Strategy |
|---|---|---|
| Oil Price Surge | Increased fiscal burden, higher inflation | Revise energy subsidies, diversify energy sources |
| Rupiah Depreciation | Increased import costs, capital outflow | Monetary intervention, policy communication |
| Economic Growth | Slowed growth, reduced consumer spending | Improve budget efficiency, stimulate domestic demand |
Indonesia’s Economic Vulnerability: A Ancient Viewpoint
Indonesia’s susceptibility to global oil price fluctuations is not new.Throughout its history, the nation has faced economic challenges stemming from its dependence on imported energy. Past crises have prompted various policy responses, including subsidy adjustments and diversification efforts. Understanding these historical trends is crucial for formulating effective strategies to navigate the current crisis.
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