Iran-US Conflict Set to Impact Indonesian Economy, Purbaya Outlines Transmission Channels
Jakarta – Finance Minister Purbaya Yudhi Sadewa has outlined several transmission channels through which the conflict between Iran, the United States, and Israel could adversely affect Indonesia’s national economy.
The minister stressed that the government will continue to monitor developments across these transmission channels to ensure swift anticipation of impacts on the local economy.
“The impact on Indonesia must be carefully monitored because it could be transmitted through several channels,” Purbaya stated during the March 2026 edition of the State Budget Press Conference on Wednesday, 11 March 2026.
The first transmission channel, according to Purbaya, originates from the trade sector. This is particularly significant following the closure of the Strait of Hormuz, which is certain to have a significant impact on global energy commodity prices.
“This will increase the burden of fuel imports due to rising oil prices, which will also compress the trade balance surplus and balance of payments,” Purbaya explained.
The second transmission channel could target the financial market, adding further uncertainty. This will prompt investors to take risk-reduction measures, or “risk off” positions.
Consequently, a substantial capital outflow from financial markets is likely to occur, particularly from developing nations.
“Increased global uncertainty could trigger capital outflows, placing pressure on the stock market, bond market, and rupiah exchange rate, whilst potentially increasing the cost of funds,” Purbaya stated.
The third channel, from the fiscal side, is predicted to directly affect Indonesia’s state budget. Purbaya anticipates that the state budget’s role as a shock absorber will come under considerable pressure.
“The state budget serves as a shock absorber, which will face potential increases in energy subsidies and debt servicing costs amid opportunities for windfall profits from commodities such as coal, palm oil, and nickel,” he said.