Israel-Iran Conflict Triggers Oil Price Surge; Indonesia Risks Competition for Supply
Deputy Chair of the People’s Consultative Assembly (MPR) Eddy Soeparno has warned that oil-importing nations risk competing for crude oil supplies in global markets following the surge in energy prices caused by Middle Eastern conflict. This situation could draw Indonesia into intense competition for energy supplies amid rising domestic demand.
The crude oil price surge occurred approximately one week after military strikes by the United States and Israel on Iran. Global crude oil prices have jumped more than 30 per cent to around $107 per barrel and have since risen further. This situation has triggered concerns about the stability of global energy supplies and pressure on national budgets.
“I discussed projections for energy commodity prices in the short term with colleagues from the banking sector who work in commodity trading. The discussion covered prospects for rising energy prices should the conflict continue for 3–12 months, including which countries would benefit and which would suffer losses,” Eddy said following a video conference with various energy observers in Singapore and Tokyo on Monday, 9 March 2026.
He explained that major energy-importing nations such as China, India, Japan, and South Korea have historically relied on crude oil supplies from the Middle East. Geopolitical tensions in the region could drive these nations to seek alternative supply sources from other regions.
Several anticipated alternative suppliers include Nigeria, Angola, and Brazil. Eddy noted that these countries have also traditionally supplied crude oil to Indonesia.
“In other words, we face the prospect of competing for crude oil supplies with giant energy-importing nations,” said the National Mandate Party member of Commission XII in the Indonesian House of Representatives.
Eddy cautioned that the implications of rising crude oil prices for Indonesia are significant. Current domestic energy demand reaches approximately one million barrels per day, meaning rising energy prices directly impact import costs.
Pressure will intensify further if the surge in global oil prices coincides with a weakening of the rupiah against the US dollar. This scenario would increase the costs of meeting domestic energy requirements.
“Particularly considering that crude oil in the state budget assumptions is valued at $70 per barrel and the budget deficit stands at approximately 2.68 per cent of GDP. With crude oil prices above $100 per barrel, the budget deficit could potentially exceed 3.6 per cent,” Eddy stated.
He noted that in 2025, Indonesia imported approximately 17.6 million tonnes of crude oil and 37.8 million tonnes of petroleum products valued at $32.8 billion, or approximately 551 trillion rupiah. If import volumes remain constant, foreign exchange requirements are expected to increase alongside rising energy prices and rupiah depreciation.
“We must be vigilant about disruptive conditions in the energy market not only from rising oil prices, but also from the perspective of supply availability. Supply security is extremely important because a global deficit in energy balance resulting from closure of the Strait of Hormuz could leave many nations scrambling to find substitutes,” he explained.
Eddy believes the government has likely prepared alternative sources of energy imports from various countries, including the United States. Supply diversification is considered important to prevent Indonesia from becoming overly dependent on a single energy supplier region.
Energy industry practitioner Hadi Ismoyo has argued that rising global crude oil prices also increase the burden on state oil company PT Pertamina (Persero) if not accompanied by adjustments to domestic fuel prices. Currently, global oil prices have reached approximately $111 per barrel, considerably above the assumed oil price in the state budget of around $70 per barrel.
This situation creates substantial pressure on national energy management. The wide gap between budget assumptions and market prices could increase the burden of energy subsidies or compensation.
“It is difficult for Pertamina if there is no price adjustment or increase in fuel subsidy allocations without raising prices. On the other hand, there is also limited fiscal space. The choices are very difficult,” Hadi said.
According to him, the surge in global oil prices drives up energy production costs. This ultimately affects the prices of various derivative products, including fuel marketed domestically.
Hadi explained that Pertamina operates as a corporation that must maintain the health of its business. In energy industry practice, increases in raw material costs are typically followed by adjustments to product prices.