CORE Indonesia: Iran-Israel Conflict Could Drive Global Oil Prices Past US$100 per Barrel
Geopolitical tensions between Iran and Israel are assessed to carry the risk of triggering a surge in global oil prices. Mohammad Faisal, economist and executive director of CORE Indonesia, warned that escalation of the conflict could exert significant pressure on the global energy market.
Faisal explained that current oil prices stand at approximately US$70 per barrel. However, if the conflict continues, prices could rise to US$80 per barrel.
He added that the greatest risk would occur if energy distribution routes through the Strait of Hormuz were disrupted. This region represents a vital route for approximately 20% of global oil trade. Disruptions in this area could potentially drive crude oil prices to surge sharply, surpassing US$100 per barrel.
“Once it reaches US$100 per barrel, that enters a high zone, a record level. In recent years we have not experienced such a significant increase; the last time was at the beginning of the Russia-Ukraine war,” he said on Sunday (1/3).
According to Faisal, armed conflict between Iran and Israel also has the potential to expand into a regional conflict involving the United States. Support from China and other nations backing Iran is assessed to be capable of prolonging the tensions.
“There is a possibility that this war will last longer than anticipated,” he stated.
The impact on Indonesia is considered inevitable. Faisal noted that increases in global oil prices will directly influence adjustments to domestic fuel prices, particularly for non-subsidised fuel which follows international market mechanisms.
However, he cautioned that potential price adjustments for subsidised fuels such as Pertalite and Solar warrant particular attention, given that these products are widely used by lower-middle-income populations.
“This price increase will certainly have the potential to affect inflation and reduce purchasing power for the general population,” said Faisal.
Meanwhile, the situation in the Middle East region has intensified following attacks launched by the United States and Israel on Saturday against multiple targets in Iran, including the capital Tehran. These attacks were reported to have caused significant damage and resulted in civilian casualties.
In response, Iran launched missile attacks on Israeli territory and targeted American military facilities in the Middle East region.
Iranian state media reported that Supreme Leader Ayatollah Ali Khamenei was killed in the combined Israeli and American attack.
Meanwhile, on Saturday the Islamic Revolutionary Guards Corps (IRGC) announced the commencement of the most brutal offensive operation in the history of Iran’s armed forces following confirmation of Khamenei’s death.
This ongoing Iran-Israel conflict continues to capture global market attention, particularly due to its impact on global oil prices, inflation, and economic stability across various countries, including Indonesia.