Budget Risks Arising from US-Israeli Aggression Against Iran
Combined United States-Israeli aggression against Iran on Saturday, 28 February 2026, triggered a spike in global crude oil prices, posing substantial risks to Indonesia’s national budget.
Moshe Rizal, an oil and gas industry expert from the Association of National Oil and Gas Companies (Aspermigas), warned that petroleum and gas commodity prices risk rising further following the closure of the Strait of Hormuz, a vital international shipping route for energy commodities. On 28 February, Iran’s Islamic Revolutionary Guard Corps (IRGC) closed the Strait of Hormuz amid escalating tensions.
The negative impact will include increased logistics costs and higher commodity prices. “As a net importer, the impact on our fuel prices will be quite significant,” Rizal stated on Sunday, 1 March 2026.
According to Trading Economics data from 27 February 2026, West Texas Intermediate (WTI) crude oil rose to US$67 per barrel, approaching seven-month highs. Brent crude climbed to US$73 per barrel, reaching near eight-month peaks. By close of trading on 28 February, WTI crude had reached US$67.2 per barrel, whilst Brent stood at US$72.8 per barrel.
Budget pressures could intensify to cover fuel subsidies. The crude oil price assumption in the national budget macroeconomics is US$70 per barrel. Should the conflict escalate, crude oil prices may continue rising, forcing the government to absorb the price differential to maintain stable subsidised fuel prices. Subsidy budgets could balloon if crude prices deviate from projections.
“The budgets we planned to spend—for example, last year for 2026—could well miss their targets,” Rizal noted.
Rising crude prices also impact the rupiah’s exchange rate. Indonesia heavily depends on imported crude oil and fuel, with transactions conducted in US dollars. As prices rise, the dollar amount required for purchases increases. Growing demand for dollars could weaken the rupiah.
This situation threatens to worsen the national budget deficit. “With this conflict, everything could run into deficit. The budget deficit could become worse,” Rizal said.
The combined US-Israeli strike on Iran occurred amidst nuclear negotiations involving Tehran. According to Al Jazeera, Iran responded by launching waves of missiles and drones at Israel and several Middle Eastern military bases where US forces operate.
Iran had previously warned that if attacked, it would respond by targeting US military facilities throughout the region. “This operation will continue relentlessly until the enemy is decisively defeated,” the IRGC stated. Besides retaliatory strikes, the IRGC announced a blockade of the Strait of Hormuz on 28 February 2026.