Finance Minister Warns Iran-US Conflict Could Pressure Indonesian Economy Through Multiple Channels

Jakarta — Finance Minister Purbaya Yudhi Sadewa has acknowledged that the armed conflict between the United States-Israel coalition and Iran could dampen Indonesia’s economic activity through various transmission channels.

He stated that the spillover effects from Middle Eastern conflict into the domestic economy are numerous and the government continues to monitor their development closely.

“For Indonesia, the impacts are transmitted through several channels that we must monitor,” said Purbaya during a state budget press conference at his office in Jakarta on Wednesday, 11 March 2026.

The first transmission channel he identified is through trade, particularly the increase in energy commodity prices resulting from the conflict and the potential closure of the Strait of Hormuz.

“Rising oil prices could increase the burden of fuel and gas imports and put pressure on trade balance surplus and balance of payments,” Purbaya explained.

Secondly, impacts could come through financial markets. He noted that the conflict could trigger uncertainty that prompts investors to take risk-off positions, resulting in capital outflows from developing countries.

“Global uncertainty can trigger capital outflows, placing pressure on equity markets, bonds, and the rupiah exchange rate, whilst potentially increasing the cost of funding,” said Purbaya.

Thirdly, there are fiscal implications. He stated that Indonesia’s state budget could face pressure given its role as a shock absorber against potential uncertainties.

“The state budget acts as a shock absorber despite facing potential increases in energy subsidies and debt servicing burdens, whilst benefiting from potential windfall profits from commodities such as coal, palm oil, and nickel,” he added.