Indonesian Entrepreneurs Profit Significantly from Iran-Israel Conflict

Jakarta, CNBC Indonesia — The surge in energy commodity prices resulting from the conflict between Iran versus Israel and the United States is causing global anxiety, but for some, this price increase represents a blessing.

The escalation of geopolitical conflict between the United States, Israel and Iran, culminating in security disruptions in the Strait of Hormuz, has created significant implications for the global supply chain.

The Strait of Hormuz’s position as a crucial logistics corridor facilitating the distribution of global energy and primary commodities means that any disruption in this region directly triggers supply shocks.

This climate of uncertainty creates a positive catalyst through surging global commodity prices.

The shift in the supply curve due to logistics constraints drives energy prices, precious metals and shipping rates to premium levels. In the domestic capital market, this situation provides substantial windfall profits for listed companies operating in related sectors.

The increase in operating margins recorded by several companies listed on the Indonesian Stock Exchange (IDX) directly translates into positive effects on company valuations controlled by leading conglomerates and ultimate beneficial owners in Indonesia. This crisis dynamic positions them as beneficiaries of the surge in global benchmark prices.

According to Refinitiv, after ten days of the Iran versus Israel-US conflict erupted, the commodity prices that surged most dramatically were oil prices, followed by coal.

The oil price surge was even higher compared with the Russia-Ukraine War.

This commodity price surge also brought profits for companies and their owners. With prices rising, company revenues can increase.

Beyond commodities, the Iran versus Israel-US conflict has also brought other benefits for fertiliser commodities and companies operating in maritime shipping.

Urea fertiliser prices have already surged more than 10% since the war.

Based on the movement of commodity prices and the impact of the war, several listed companies have benefited, including:

Sectoral Analysis and Commodity Price Movements

The supply disruption caused by conflict escalation brings fundamental implications specific to each asset class. Below is a breakdown of the profit mechanisms obtained by each sector along with the position of commodity benchmark prices.

Below is a holistic mapping of the sectors benefiting from the disruption of global supply chains due to the conflict in the Middle East, based on updates to listed company data and their main controlling structures.

Oil and Gas Sector

Current Benchmark Price: Brent crude oil has surged to touch the US$119 per barrel level, whilst WTI trades in the highest range of US$112 due to closure of the Strait of Hormuz.

This maritime route is vital as it accommodates approximately 20% of global oil supply. Disruptions on this route create an instant global supply deficit.

Upstream oil and gas producing companies such as MEDC controlled by the Panigoro Family and ENRG under the control of the Bakrie Group become direct beneficiaries.

This surge in benchmark prices directly raises the company’s Average Selling Price (ASP), widening profit margins without needing to significantly increase production volumes.

ELSA also receives positive secondary effects if high oil prices encourage upstream contractors to increase capital expenditure (capex) budgets for exploration activities.

Coal Sector

Current Benchmark Price: Newcastle coal benchmark (ICE) trades moderately in the range of US$130 — 140 per ton.

The coal sector’s correlation with the Middle East conflict operates through an energy substitution mechanism. When the crisis drives crude oil prices beyond the economic threshold for industry, manufacturing nations shift energy supply needs towards coal.

With oil prices correcting, the urgency of this substitution gradually begins to ease, but this uncertainty remains a top priority as substitution becomes an important part of energy security for these nations.

This increase in substitution demand maintains sales volumes and margins for coal companies. Alamtri Resources Indonesia (ADRO) possesses strong cost efficiency structures (cash cost).

These conditions enable the company to generate maximum free cash flow amidst high substitute energy commodity prices and the non-categorisation of the company under new DMO regulations.

Aluminium Sector

Current Benchmark Price: London Metal Exchange (LME) aluminium benchmark stabilises in the range of US$3.300 — 3.400 per ton.

The Gulf region is the world’s aluminium smelting base due to access to cheap natural gas supplies. Previous fears of maritime blockade triggered a buying spree that drove aluminium prices higher due to expectations of supply scarcity.

Peace declarations ensure operations and logistics of smelters in the Middle East run without obstruction. This normalisation of supply eliminates the scarcity premium in global aluminium prices.

The impact on ADMR (Alamtri Minerals Indonesia) is neutral, given that investor focus on this company remains on long-term execution of completion of the smelter facility in North Kalimantan, rather than solely on short-term commodity price fluctuations.

Precious Metals Sector (Gold)

Current Benchmark Price: Gold spot price (XAU/USD) undergoes consolidation in the range of US$5.000 — 5.200 per troy ounce after a fairly sharp rally caused by global panic.

In the macroeconomic landscape, gold is a safe haven instrument or absolute hedge when geopolitical uncertainty peaks. This escalation scenario automatically reduces market risk appetite away from riskier assets towards safer ones.

Rising global risk triggers massive liquidity flows from financial institutions exiting risky assets towards precious metals markets. This increase in underlying gold prices directly raises the asset valuations and profitability projections of mining companies.