Israeli Attack on Iran Could Drive Up Prices in Indonesia
The founder and CEO of Supply Chain Indonesia (SCI), Setijadi, has estimated that diesel prices could rise by Rp 750-2,000 per litre as a result of the Israeli attack on Iran.
“The impact on Indonesia will occur through transmission of global oil prices (Brent) to domestic diesel prices,” he said in a written message on Sunday, 1 March 2026.
The United States and Israel conducted a military strike against Iran on Saturday, 28 February 2026, targeting Iran’s highest-level leaders and pushing the Middle East into an increasingly widening conflict.
Diesel price increases could occur because the escalation of the conflict risks causing disruptions at the Strait of Hormuz. This waterway is used for approximately 20 per cent of global oil consumption and 20-25 per cent of global liquefied natural gas (LNG) trade. As a result, international energy prices could spike if disruptions occur.
Setijadi’s estimated range of diesel price increases is based on a moderate scenario of global oil price increases of US$25 per barrel. Global oil prices could even soar to US$50 per barrel in a more severe scenario.
Setijadi stated that diesel is a primary component of truck operational costs, which form the backbone of national distribution.
Setijadi expressed concern that the rise in global oil prices due to Middle Eastern conflict could significantly increase goods distribution costs in Indonesia.
He estimated that transportation cost increases could reach 10.5-12 per cent if diesel prices rise by 30 per cent. These transportation cost increases are based on the assumption that fuel costs account for 35-40 per cent of total truck operating costs.
Increases in distribution costs would affect goods prices, since average logistics costs in Indonesia are estimated at 14 per cent of product prices.
Truck cost increases exceeding 10 per cent can push goods price increases to near 0.8 per cent, particularly for bulky commodities and thin-margin items such as food, building materials, and fast-moving consumer goods.
Setijadi noted that Indonesian logistics still relies heavily on road transport, so sensitivity to diesel price fluctuations is relatively high. The greatest risk is inflationary pressure on distribution costs, particularly for food commodities and essential needs.
As a result, import-dependent industries face dual risks. They experience rising import costs due to surging oil prices and increased domestic distribution costs.
Additionally, the construction sector and small and medium enterprises (SMEs) are relatively vulnerable due to high transportation costs and limited margins.
Given these vulnerabilities, Setijadi urged the government to maintain BBM price stability through adaptive fiscal policy and accelerate energy diversification.
He also recommended strengthening multimodal connectivity, particularly optimising maritime and rail transport. Setijadi considers strengthening distribution to be important for reducing sensitivity to diesel price fluctuations.
He also emphasised the need for distribution route efficiency, cargo consolidation, and implementation of fuel cost adjustment mechanisms in logistics contracts.
According to him, without structural reform of the logistics system, every global shock risks becoming domestic price pressure and weakening the public’s purchasing power.