Iran Conflict Triggers Fiscal Risk for Indonesia; Government Urged to Improve Efficiency
Jakarta — The escalating conflict between the United States and Iran is expected to continue for the foreseeable future and threatens to undermine global economic stability, including Indonesia.
The Prasasti Center for Policy Studies has assessed that geopolitical tensions in the Middle East could create fresh pressures on the domestic economy, particularly through surging global energy prices.
Research Director Gundy Cahyadi stated that intensifying conflict between the United States and Iran is beginning to alter Indonesia’s previously relatively positive economic outlook.
“At the beginning of the year, Indonesia’s economic prospects remained relatively positive with projected growth in the range of 5.0–5.3 per cent. However, the conflict between the United States and Iran is beginning to change those projections,” Cahyadi explained in a press statement on Tuesday (10 March 2026).
According to Cahyadi, the situation increases risks for energy-importing nations, including Indonesia, which still imports the majority of its oil requirements.
“Rising energy prices will increase production costs, suppress public purchasing power, and place pressure on the rupiah’s exchange rate,” Cahyadi said.
If oil price increases persist over an extended period, the likelihood of Indonesia’s economic growth dropping below 5 per cent becomes significantly greater.
“The government must already begin transitioning from business-as-usual mode to crisis mode,” he added.
This figure remains well below the standard recommended by the International Energy Agency (IEA), which reaches 90 days of net imports.
Additionally, rising oil prices could potentially increase the burden of energy subsidies in the State Budget (APBN).
In government simulations, if average oil prices reach approximately 92 US dollars per barrel, or roughly Rp 1,444,400 per barrel, the 2026 budget deficit could potentially widen to approximately 3.6–3.7 per cent relative to gross domestic product (GDP).
This figure exceeds the fiscal deficit limit of 3 per cent.
“This situation requires more careful fiscal management, especially if global energy prices remain high,” Cahyadi said.
Finance Minister Purbaya Yudhi Sadewa stated that fuel subsidy policy continues to be maintained because the fiscal position is still deemed capable of withstanding the impact of global energy price volatility.
“Until now, there has been no policy to change fuel subsidies, in the sense of raising fuel prices,” Purbaya said following an inspection at Tanah Abang Market, Jakarta on Monday (9 March 2026).
Purbaya explained that current global oil price developments remain below the maximum capacity assumed in the State Budget (APBN).
“The economy is still expanding. I have not yet observed any disruption to domestic economic activity due to high rising prices, but this has only been occurring for a short time,” he said.
He also cautioned against various parties hastily concluding that global oil prices will continue to surge for an extended period.
“Don’t rush to assume prices will continue at 100 US dollars per barrel,” Purbaya said.
“Some are even saying it could reach 150 US dollars per barrel, and our budget cannot handle that. We will continue to assess the situation over time.”
The current surge in global oil prices is occurring as geopolitical tensions in the Middle East intensify.
According to Reuters, concerns about supply disruptions through the strategic Strait of Hormuz route have also driven oil prices to their highest level since July 2022.
On Monday (9 March 2026) at 08:15 Western Indonesia Time, Brent crude oil prices for May 2026 delivery jumped 18.35 US dollars or 19.8 per cent to 111.04 US dollars per barrel, or approximately Rp 1,765,536 per barrel.