Energy Observer: Prepare for Fuel Price Hikes as Israel-Iran Conflict Escalates
JAKARTA – The escalation of conflict between Iran and Israel threatens to shake global energy markets. Global crude oil prices, previously hovering around $67 USD per barrel, have now breached the $80 USD per barrel level.
Should the conflict expand and the Strait of Hormuz remain closed, crude oil prices could potentially surge to $100 USD per barrel or higher. As a consequence, Indonesia, which imports substantial quantities of fuel, must prepare for fiscal pressure and the potential for increased fuel prices.
Energy observer and economist from Gadjah Mada University (UGM), Fahmy Radhi, stated that the spike in oil prices has already occurred since the initial attack in the Middle Eastern conflict. If war escalation extends further, the situation worsens, and global crude oil prices could potentially rise to the $100 per barrel level.
“Clearly, the initial attack has already raised oil prices—global crude moved to $67 USD and now has breached approximately $80 USD. And if the war escalation expands, it will certainly trigger even higher increases, indeed there is potential for prices to reach $100 USD per barrel; that is possible,” Fahmy stated when contacted by Kompas.com on Sunday, 1 March 2026.
Iran is the fourth largest crude oil producer within the Organisation of the Petroleum Exporting Countries (OPEC), with production exceeding 3 million barrels daily as of January 2026.
This Islamic Republic also possesses a coastline directly bordering the Strait of Hormuz, the most vital maritime route for global crude oil trade.
Beyond the price surge, Iran’s closure of the Strait of Hormuz is viewed as a serious threat to global supply chains. This strait represents a vital route for transporting crude oil, gas, and various global commodities. Disruptions in this corridor would not only affect the Middle East region but would also have broad implications for other nations, including Indonesia.
Fahmy explained that Indonesia still relies on crude oil imports of approximately 1.2 million barrels daily. As a net fuel importer, increases in global oil prices automatically expand the burden on the State Budget (APBN), particularly for energy subsidies.
“If it reaches $80 per barrel, Indonesia, as a net fuel importer, especially with large quantities of fuel—1.2 million barrels daily—this will swell the APBN. Especially for subsidies; the subsidy burden will become heavier,” he stated.
However, regarding subsidised fuel such as Pertalite and diesel, decisions to raise prices become highly sensitive.
According to him, if subsidised fuel prices are not increased, the subsidy burden will expand and strain state finances. Conversely, if prices are raised, the impact could trigger inflation, reduce consumer purchasing power, and impede economic growth.
“Such a scenario places Indonesia in a difficult position,” Fahmy explained.