Coordinating Minister Airlangga Outlines Worst-Case Impact of Iran-Israel War on National Budget

Coordinating Minister for Economic Affairs Airlangga Hartarto has explained that the government faces considerable difficulty in maintaining the national budget deficit below 3 per cent of gross domestic product due to the escalating Iran-Israel conflict.

In a full cabinet session on Friday 13 March 2026, Airlangga presented several scenarios demonstrating how the duration of the conflict could affect global crude oil prices.

A five-month conflict would drive oil prices to approximately $90 per barrel (around Rp1,522,000 at an exchange rate of Rp16,900). A six-month conflict would push prices to $97 per barrel (around Rp1,637,136), which remains substantially elevated and would widen the budget deficit. The worst-case scenario, spanning ten months, would see oil prices surge to $115 per barrel (Rp1,942,120).

Under the six-month scenario, assuming crude oil at $97 per barrel, economic growth is projected at 5.2 per cent whilst state bond yields stand at 7.2 per cent. The worst-case scenario assumes oil prices of $115 per barrel with the rupiah weakening to Rp17,500 per dollar, whilst economic growth remains at 5.2 per cent and bond yields at 7.2 per cent. In this scenario, the budget deficit would reach 4.06 per cent—an unsustainably wide gap that would stall Indonesia’s economic expansion.

“So with various scenarios like these, maintaining a 3 per cent deficit is difficult for us,” Airlangga stated during the cabinet session. “Unless we wish to cut spending and curtail the President’s growth targets. These are some scenarios that may require more limited discussion.”

As tensions in the Middle East intensify, the Energy and Natural Resources Minister Bahlil Lahadalia is considering crude oil imports from the United States.