Industry Minister Outlines the Impact of the Middle East Conflict on Manufacturing
Industry Minister Agus Gumiwang Kartasasmita said the conflict between the United States–Israel and Iran has triggered volatility in global energy prices and disruptions to international trade routes that could affect the competitiveness of Indonesia’s domestic manufacturing sector.
“We are continuing to monitor developments in the Middle East because the region is a global energy hub and a highly important logistics corridor,” he said in a written statement on Thursday, 5 March 2026.
According to Agus Gumiwang, disruptions to global energy distribution pose the greatest risk to the manufacturing sector. He noted that the Middle East, particularly the Strait of Hormuz, is a vital route for global oil trade. About one-fifth of global oil supply passes through this route. Therefore, any disruption in the region could trigger a rise in international energy prices.
Gumiwang also highlighted a drastic decline in tanker traffic as geopolitical tensions intensify in the region. As a result, a rise in global oil prices is inevitable.
He warned that a long-term increase in global energy prices would raise production costs, undermining production efficiency and the competitiveness of products in both domestic and export markets. He cited industries such as petrochemicals, basic metals, cement, and fertilisers as particularly sensitive to energy price fluctuations.
The escalation of energy prices over the long term would elevate production costs. This situation, he said, could erode production efficiency and the competitiveness of products in domestic or export markets.
Geopolitical tensions could also affect the availability of imported industrial raw materials. Industries reliant on imported inputs — including chemicals, petrochemicals, textiles, metals, and even food and beverages — would be among the most affected.
Moreover, geopolitical tensions could raise the cost of procuring raw materials and prolong delivery times due to shifts in global logistics routes.
The Industry Minister also touched on the export performance of the manufacturing sector, which could be affected by disruptions to international trade routes. He said geopolitical tensions generally trigger volatility in global markets, causing demand from export destinations to fluctuate. “The performance of Indonesia’s manufacturing exports has long been shaped by global economic stability and international demand,” the Golkar politician said.
To bolster resilience in the national industrial sector, Agus Gumiwang said the government is strengthening the upstream industrial structure, increasing the use of domestic raw materials, and expanding diversification of export markets.
He also urged improvements in energy efficiency within the industrial sector and accelerated transition towards a green industry to reduce dependence on fossil fuels whose prices are highly affected by geopolitical dynamics.
To ensure the national manufacturing sector continues to grow and remain competitive amid global dynamics, the Industry Ministry will continue to coordinate with industry players, associations, and relevant ministries/agencies.