Iran versus US-Israel Conflict Threatens Oil Prices and Rupiah, Government Urged to Prepare
Jakarta — Conflict between Iran, the United States, and Israel has triggered concerns in global markets. Iran’s strategic position astride the Strait of Hormuz and proximity to Bab el-Mandeb means that regional conflict poses a significant risk to global energy price stability.
Rahma Gafmi, Professor of Economics at Airlangga University, stated that the Strait of Hormuz is far more than a routine shipping channel. “The Strait of Hormuz is the economic chokepoint of the world. Nearly 20 million barrels of oil per day transit through it, supplemented by LNG supplies that power Europe. In other words, fuel for cars, aeroplanes, and factories depends on this route,” she said in written remarks on Sunday, 1 March 2026.
According to Rahma, should this route be disrupted, oil prices could surge rapidly. History, she noted, has provided lessons. During the “Tanker War” of the 1980s and the 2019 attacks on Saudi Arabian oil facilities, oil prices spiked due to supply disruptions.
“The oil market is highly sensitive. Even a limited attack can immediately trigger sharp price increases,” she said.
Similar threats loom over Bab el-Mandeb, which serves as the gateway to the Red Sea and the route to the Suez Canal. Should access be blocked, vessels would be forced to circumnavigate Africa. The consequences would be increased logistics costs, longer delivery times, and higher commodity prices.
For Indonesia, surging oil prices would directly impact the energy subsidy burden. Rising crude prices could widen fiscal pressure and force the government to adjust budgetary allocations. “If prices spike, fuel and electricity subsidies could balloon,” Rahma said.
Global turbulence is typically accompanied by pressure on the rupiah’s exchange rate. Rupiah weakness would increase import commodity prices and trigger inflation. Manufacturing and processed food sectors, which remain heavily reliant on imported raw materials, are assessed as most vulnerable.
Rahma assessed that investors will now monitor Middle Eastern developments daily. Oil prices, gold, and global commodity prices move fluidly in response to geopolitical sentiment. Gold tends to strengthen as a safe-haven asset, whilst stock markets become more volatile.
The government is urged to strengthen coordination of inflation control and maintain domestic energy supply. Energy diversification and accelerated renewable energy development are considered pressing medium-term measures.
“The situation is highly dynamic. Indonesia must focus on strengthening its domestic economic foundation to avoid excessive vulnerability to external shocks,” Rahma said.
She emphasised that the conflict’s impact extends beyond oil prices alone. “Imagine if both routes were to close simultaneously. Oil prices spike, inflation rises, global trade slows. The cascading effects reach household budgets,” she said.
According to her, precautionary measures need to be prepared immediately, ranging from energy reserve reinforcement, exchange rate stabilisation, to active diplomacy to promote conflict de-escalation.
“Indonesia must remain vigilant, but not panic. What matters is that markets are closely monitored and policies are prepared in advance,” she said.