Iran Conflict: Four Catastrophic Impacts That Could Shake Indonesia and the World
Geopolitics in the Middle East have intensified once again and are now entering a far more dangerous phase.
The United States and Israel launched a large-scale military strike on Iran on Saturday, 28 February 2026, including against the capital Tehran, which subsequently triggered a surge in global market concerns.
The situation escalated further following official reports initially announced by US President Trump and subsequently confirmed by Iranian media that Iran’s Supreme Leader Ayatollah Ali Khamenei had been killed in an operation Trump termed “Operation Epic Fury”.
This escalation opens up greater risks, ranging from oil price volatility, global inflation pressure, to increased uncertainty in global financial and political markets.
If the conflict continues to expand and persists for an extended period, the world could face a series of significant adverse impacts.
- Rise in Global Oil Prices
One of the most tangible impacts of the escalating geopolitical tensions in the Middle East is the rise in global oil prices. This is understandable given that the Middle East is one of the world’s most important centres of energy production and distribution routes.
When military tensions increase, markets tend to react to concerns about potential supply disruptions, causing oil prices to rise.
According to Refinitiv data, on Monday, 2 March 2026 at 10.00 WIB, global oil prices experienced a sharp increase in response.
Brent crude oil was recorded at US$76.43 per barrel, whilst WTI stood at US$70.05 per barrel. This position represented a significant increase compared to the close on Friday, 27 February 2026 when Brent was still at US$72.48 per barrel and WTI at US$67.02 per barrel.
This price surge was also driven by market concerns about the potential disruption of global energy distribution routes, particularly through the Strait of Hormuz. This route is a vital link between oil-producing nations in the Persian Gulf region and international markets, making it one of the world’s most strategically important energy trade routes.
The Strait of Hormuz plays a very significant role in global energy trade. Approximately 22% of global oil supply, or nearly a quarter of total global supply, passes through this route. Not only oil, but approximately 20% of global liquefied natural gas (LNG) trade also passed through the Strait of Hormuz in 2022.
This means that when concerns emerge that this strait could potentially be closed or threats arise to passing vessels, markets immediately respond with increased oil prices. The risk of supply disruptions becomes a major factor driving the surge in energy commodity prices.
Nevertheless, the future direction of oil price movements remains highly dependent on the development of the conflict.
The longer the tensions persist and the greater the risk of energy distribution disruptions, the greater the likelihood that oil prices will remain high or even continue to increase.
- Inflation Surge Becomes a Threat
Rising oil prices have the potential to directly drive higher inflation.
The surge in oil prices poses a serious threat to inflation because energy is a fundamental component of virtually all economic activity.
When oil prices rise, transport costs and production costs increase as well. Ultimately, these cost increases are typically passed on to the selling prices of goods and services, causing prices in society to rise.
The IMF has noted that a 10% increase in global oil prices can on average drive domestic inflation by approximately 0.4 percentage points in the early stages of its impact.
A concrete example was evident when the Russia-Ukraine war erupted in 2022. That war triggered major shocks in global commodity markets and drove the sharpest increase in energy prices since the 1973 oil crisis. The increase in commodity prices subsequently exacerbated global inflation pressure.
This means that if geopolitical conflict again triggers a surge in oil prices, the threat extends beyond just the energy market but also to prices of goods in general. If this condition persists for an extended period, public purchasing power could be eroded and inflation pressure will become increasingly difficult to control.
The impact will also be evident in global interest rates. When inflation is high, central banks tend to keep interest rates elevated or even raise them further. Ultimately, this condition can suppress economic activity and slow global economic growth.
- US Dollar Strengthens, Emerging Market Currencies Weaken
Another impact that is also being felt is the strengthening of the US dollar in global markets.
This is reflected in the movement of the US Dollar Index, or DXY, which is an index that measures the strength of the dollar against six major world currencies. In this morning’s trading, the DXY was recorded as strengthening 0.20% to the level of 97.800. The dollar is also benefited by its status as a safe-haven asset when market risk sentiment worsens.
The strengthening of the DXY indicates that dollar-denominated assets are again being sought by investors. When global uncertainty increases, market participants tend to shift funds to instruments considered safer, and the US dollar becomes one of the primary destinations.
This condition then puts pressure on other countries’ currencies, including the rupiah.
The rupiah weakened 0.42% to the level of Rp16,830/US$ this morning, Monday, 2 March 2026, after weakening 0.06% to the level of Rp16,760/US$ in previous trading. Weakness also occurred in other Asian currencies, ranging from the Malaysian ringgit to the South Korean won, which were also recorded as weakening.
In other words, if geopolitical tensions continue to rise, the strengthening of the US dollar has the potential to continue. The impact extends beyond just exchange rates but can also add pressure in developing country financial markets that are sensitive to capital flows and changes in investor risk appetite.
- Volatility in Global Stock Markets
The escalation of geopolitical conflict also triggers volatility in global stock markets. When uncertainty increases, investors typically tend to divest risky assets such as equities and shift to instruments considered safer.