Iran Closes Strait of Hormuz, Government Warns of Impact on Fuel Prices
Domestic fuel prices risk rising if the Middle East conflict continues following Iran’s closure of the Strait of Hormuz. Global oil prices have surged approximately 10% following the closure, with crude oil now trading at US$80 per barrel.
Coordinating Minister for Economic Affairs Airlangga Hartarto said the tensions in Iran and the surrounding region will directly impact the global oil supply chain. He noted that the trajectory of the conflict will be crucial in determining future policy directions.
“We will observe the extent of the conflict and fuel prices,” he stated at the Coordinating Ministry for Economic Affairs office in Jakarta on Tuesday, 3 March.
Hartarto explained that the government’s anticipatory measures depend on the duration and escalation of the conflict. He highlighted that the impact would differ between a brief conflict and prolonged hostilities such as those in Ukraine.
Regarding import supplies during the crisis, he assured that the government has taken proactive steps. Memoranda of understanding (MoU) between Pertamina and several companies, he said, can serve as a solution to maintain fuel supply availability.
“There are already MOUs between Pertamina and several companies that can certainly be executed to meet fuel stock requirements,” Hartarto said.
Addressing questions about domestic conditions, Hartarto emphasised that Indonesia’s energy supply remains secure.
“We remain safe,” he said.
Regarding potential special incentives to mitigate geopolitical impacts, he noted that the government continues to monitor developments.
“Let us see. This conflict has only been ongoing for a few days, so we will monitor its duration,” he concluded.
The escalating tensions between Iran, Israel, and the United States extend beyond political issues into the global economy. A major consequence is the surge in shipping and logistics costs due to Iran’s closure of the Strait of Hormuz.
Geopolitical tensions in the Middle East, particularly the conflict between Israel and Iran and the potential closure of the Strait of Hormuz, remain a serious concern for the Indonesian government. The escalation between the two nations risks closing the Strait of Hormuz, which would trigger a significant rise in logistics costs.
According to Deutsche Bank projections, global crude oil prices could surge to as high as US$120 per barrel. The Strait of Hormuz is the world’s most strategically vital oil shipping route and controls a critical portion of global energy supplies.