Global oil prices reach five-year high
Global oil prices surged sharply over the past week as tensions in the Middle East disrupted global energy supply lines. The closure of the Hormuz Strait amid the conflict between Iran and the US–Israel bloc was the main trigger for the price spike.
According to Trading Economics, West Texas Intermediate (WTI) crude rose to US$84 per barrel on Friday, 6 March 2026. Week-on-week, that US benchmark jumped about 21 percent, the biggest rise since 2020.
The jump came after a crisis in the Gulf that nearly halted shipments through the Strait of Hormuz, a strategic maritime route typically traversed by around 20 million barrels of oil and petroleum products every day.
Meanwhile, Brent crude also rose. The global benchmark climbed to US$85.41 per barrel, up 4.93 percent or about US$4.01.
Commercial traffic in the Strait of Hormuz was reportedly nearly halted due to heightened security risks, insurance issues, and operational uncertainty. Several producers have started cutting production, tightening supply in the global market.
The US government signalled possible steps to curb energy price pressures, including the option of releasing oil from the Strategic Petroleum Reserve. Washington also temporarily granted India latitude to purchase some crude oil from Russia that was already at sea.
Trading Economics said Saudi Arabia raised its selling price to buyers in Asia and redirected some shipments through the Red Sea to avoid the Hormuz route.
Fiscal implications for Indonesia
The surge in global oil prices could weigh on Indonesia’s fiscal position. The state budget (APBN) faces the risk of a widening deficit if Middle East tensions escalate.
In the macro assumptions of the 2026 APBN, the government set the price of oil at US$70 per barrel. However, by early March 2026, world oil prices had already breached US$80 per barrel.
Secretary of the Coordinating Ministry for Economy Susiwijono Moegiarso said every one-dollar increase in the Indonesian Crude Price (ICP) would raise subsidy and energy compensation expenditures by about Rp10.3 trillion.
On the other hand, higher oil prices also boost state revenue from the oil and gas sector. Susiwijono said each US$1 per barrel increase could lift non-tax state revenue (PNBP) from the oil and gas sector by around Rp3.6 trillion. Yet such additional revenue would still be smaller than the higher spending, resulting in a deficit of about Rp6.7 trillion per US$1 increase.
Meanwhile, Energy and Mineral Resources Minister Bahlil Lahadalia stressed that subsidised fuel prices would not change despite the rise in global oil prices. He said, “Prices remain unchanged until there is a government policy adjustment.”
He noted that the ICP in the 2026 APBN is set at US$70 per barrel, while market prices are currently around US$78–80 per barrel. The rise could increase the need for energy subsidies.
Bahlil also said the government would shift crude oil imports from the Middle East to the United States. Currently, about 25 percent of Indonesia’s oil imports come from that region. He described this shift as part of the Agreement on Reciprocal Trade (ART) between Indonesia and the United States, under which Indonesia commits to buying oil and liquefied petroleum gas from the United States worth US$15 billion.
Fahmy Radhi, lecturer at the Faculty of Economics, Universitas Gadjah Mada, said the spike in global oil prices creates a dilemma for policymakers. If subsidised fuel prices are not raised, the subsidy burden on the APBN will increase; if prices are raised, inflation could follow given the large consumption of subsidised fuels by Pertalite and diesel. “Because the biggest consumers of subsidised fuel are Pertalite and diesel. It is indeed a difficult choice for the government,” he said.
Contributed by M. Faiz Zaki