Oil Prices Surpass 115 US Dollars, Economist Warns of Indonesia's Fiscal Risks

The war in the Middle East that has erupted between Iran and the US-Israel is predicted to be prolonged, following the involvement of the Houthi group which threatens to close the Bab al-Mandab Strait. As a result, global crude oil commodity prices are forecasted to surge even higher. Indonesia needs to be vigilant against the various risks and impacts that will arise from this situation.

“The Iran vs Israel+US war will last a long time. We must prepare for rising energy prices, especially oil and LPG,” stated economist Wijayanto Samirin from Paramadina University when contacted by Republika on Monday (30/3/2026).

Global crude oil prices are currently observed to have breached the 115 US dollars per barrel level. This figure is far above the oil price assumption in the 2026 state budget of 70 US dollars per barrel.

With the surge in global crude oil prices, the state’s budgetary burden for energy subsidies and compensation will swell. The state budget deficit is inevitably at risk of widening.

“The state budget deficit will explode, inflation will rise, and people’s purchasing power will weaken,” he emphasised.

At the same time, Wijayanto continued, the rupiah exchange rate against the US dollar has the potential to weaken further. The rupiah’s position at the close of trading on Monday (30/3/2026) has breached the Rp 17,002 per US dollar level. The Garuda currency is predicted to continue correcting.

“The rupiah has the potential to come under even more pressure. If not careful, Indonesia could face a fiscal crisis that could lead to a rupiah exchange rate crisis,” he stated.

Pressure on the rupiah, Wijayanto said, is actually more caused by the less solid fiscal situation before the Iran vs US-Israel war broke out. However, the ongoing warfare in the Middle East has worsened the rupiah’s exchange rate.