Middle East Conflict Sparks Concerns Over Global Oil Price Rise
Geopolitical tensions in the Middle East have escalated following joint military strikes by the United States and Israel against Iranian facilities on Saturday, 28 February 2026. This situation has raised significant concerns regarding impacts on global oil prices and the Indonesian economy.
Yayan Satyakti, an energy economics observer from Padjadjaran University (Unpad), assessed that the conflict has triggered market concerns regarding potential disruptions to global crude supply, particularly due to threats of closure of the Strait of Hormuz, a strategically critical oil export route.
Global crude oil prices at the close of trading on Friday, 27 February 2026 showed West Texas Intermediate (WTI) at US$67.02 per barrel and Brent at US$72.80 per barrel.
According to Yayan’s analysis, escalation of the conflict could trigger significant oil price increases. Moreover, potential retaliatory measures such as restricting access or attacking oil infrastructure could worsen the situation.
Using Game Theory modelling, Yayan projected that oil prices could surge more than 100% from baseline levels if military escalation between Israel, the US, and Iran continues. This suggests that global oil prices could reach approximately US$140 per barrel by early March 2026.
“In this scenario, the likelihood becomes increasingly high above 100% from baseline, meaning oil prices around US$140, which would occur around 7 March 2026,” Yayan told Bisnis on Sunday, 1 March 2026.
In a moderate scenario, a 25% increase is estimated to push prices towards US$87.50 per barrel. Even in the short term, a range of US$70–80 is considered highly plausible.
Yayan explained that rising global oil prices would impact Indonesia, particularly because the baseline crude oil price assumption in the 2026 state budget is US$70 per barrel.
Rising global oil prices could potentially force the government to revise fiscal assumptions as they could trigger increases in domestic fuel prices.
“There is a likelihood that fuel prices will rise by around 5% to 10% in the coming weeks if escalation continues,” said Yayan.
Additionally, oil import costs are also likely to increase, which could add pressure to the state budget. However, conversely, higher oil prices could also increase state non-tax revenue (PNBP) from the oil sector.
The conflict could also cause the rupiah to weaken against the US dollar due to increased demand for dollars to purchase imported oil.
In the medium term, escalation in oil prices is estimated to narrow the government’s fiscal space due to increased energy subsidy burdens and erode foreign reserves in US dollars due to payments for increasingly expensive oil imports.
“Dollar reserves will diminish as oil becomes more expensive, resulting in dollar depreciation,” said Yayan.
Oil and gas practitioner Hadi Ismoyo agreed that the current military escalation is more serious than before, particularly because the Strait of Hormuz is traversed by 20% of global oil exports and 30% of LNG exports.
“My prediction is that oil prices will rise significantly due to supply uncertainty from Gulf nations,” said Yayan.
Hadi Ismoyo, former secretary-general of the Indonesian Association of Petroleum Engineers (IATMI), also argued that domestic fuel prices have the potential to rise because Indonesia still imports approximately 1 million barrels of crude oil daily (bpd).
“However, the mechanism for fuel price increases requires government approval. So even if imported crude rises, Pertamina cannot directly raise fuel prices without government approval,” said Hadi.