Airlangga: Fuel Prices Could Rise Due to Middle East Conflict
Coordinating Minister for Economic Affairs Airlangga Hartarto has stated that heightened tensions in the Middle East could impact fuel price increases. Global oil supplies have been disrupted following the closure of the Strait of Hormuz, a vital oil trade route.
“Prices will automatically rise, just as during the Ukraine war. However, this time supply from America will also increase and OPEC will also increase its capacity,” he said on Monday, 2 March 2026.
For Indonesia, Airlangga explained there are three other direct impacts from the conflict between the United States and Israel versus Iran. First, disrupted oil supply; second, logistics and transportation; and third, the tourism sector.
Global crude oil prices surged again on Monday, 2 March 2026. Today’s oil price increase continued the spike that occurred at the close of trading on Saturday, 28 February 2026, following the combined US-Israeli military action against Iran.
Fahmy Radhi, lecturer at the Faculty of Economics at Gadjah Mada University (UGM), stated that rising oil prices are an unavoidable consequence of the conflict occurring in the Middle East region. If aggression continues, oil prices will continue to soar.
“If it escalates, I estimate it could reach US$100 per barrel,” Fahmy told Tempo on 2 March 2026.
Indonesia, as the region’s largest crude oil importer, will feel the impact if oil prices reach that level. Fahmy stated that non-subsidised fuel such as Pertamax and above will not be significantly affected, as prices follow market mechanisms.
However, the spike in global crude oil prices could create a dilemma for the government, which bears the cost of subsidised fuel such as Pertalite and diesel. If subsidised fuel prices are not increased at the consumer level, the burden on the state budget to cover the price difference will balloon. Crude oil prices based on the macroeconomic assumptions in the national budget are set at US$70 per barrel. If prices rise, the government must absorb the higher price differential to maintain stable subsidy prices.
However, if the government raises consumer-level prices, inflation will occur. “Because the largest fuel consumer is Pertalite and diesel. So this is indeed a difficult choice for the government,” said Fahmy.