Business Community Urges Government Action as Iran-US Conflict Escalates
Jakarta – The Indonesian Employers’ Association (Apindo) has stated that it continues to monitor the escalating conflict between the United States and Israel against Iran, which risks spreading throughout the Middle East region. The business community assesses that conflict risks extend beyond market sentiment to include potential energy price spikes, exchange rate pressures, and fiscal burdens on the state.
Deputy Chairman Apindo Sanny Iskandar stated that the primary risk stems from potential disruptions to global energy supply routes, particularly the Strait of Hormuz, which represents one of the world’s key energy trade bottlenecks.
“Apindo continues to closely monitor the escalation of US-Israeli attacks on Iran that could spread into a regional conflict in the Middle East. The main risks do not only come from market sentiment but also from the potential for disruptions to global energy and trade routes, particularly in the Strait of Hormuz region, which is one of the world’s key energy trading bottlenecks, with approximately 20 per cent of the world’s oil passing through this area,” Sanny told CNBC Indonesia on Monday (2 March 2026).
According to him, even without physical closure of the route, uncertainty alone can drive increases in the risk premium on oil and gas prices and international logistics costs.
“Business operators’ concerns at present are rising risk premiums on oil and gas prices, as well as increases in international logistics costs. Even without physical closure of the route, uncertainty alone can drive spikes in global energy and logistics costs,” he explained.
Indonesia, as a net oil importer, faces pressure that could potentially increase production costs and narrow fiscal room, should global energy prices rise above budget assumptions, according to Sanny.
According to him, Indonesia is vulnerable to energy price spikes. If prices remain elevated, the burden of energy subsidies and compensation could increase and put pressure on budget deficits.
“Apindo believes it is important for the government to manage this risk carefully so as not to create excessive pressure on the deficit and state debt financing,” he stated firmly.
Apindo also cautioned against potential rupiah volatility resulting from global risk-off dynamics. Weakening exchange rates will increase the cost of energy and food imports, making coordination of monetary and fiscal policy crucial for maintaining macroeconomic stability.
From a sectoral perspective, industries dependent on energy and international logistics will face direct pressure. Labour-intensive sectors are cited as most vulnerable due to thin margins and high sensitivity to distribution costs and imported raw materials.
“The impact on the business sector itself will vary. Industries with high dependence on energy and international logistics will face direct pressure. Labour-intensive sectors are among the most vulnerable because of thin margins and high sensitivity to distribution costs, imported raw materials, and disrupted export demand,” he said.
Although Indonesia’s direct trade relations with Iran and Israel are relatively limited, Sanny believes the indirect effects through global energy prices, exchange rates, food inflation, and financial market sentiment are far more relevant to the national business community.
In the short term, he said, business operators are focused on realistic and adaptive risk mitigation steps.
These include adjusting production and distribution cost structures, improving operational efficiency, implementing more disciplined risk management including foreign exchange exposure management, diversifying supply sources, and utilising available hedging instruments or natural hedging.
“Overall, the business community is addressing this situation with a wait-and-see approach but preparing should global pressure continue,” he concluded.