The Impact of Middle East Geopolitics on Indonesia's Automotive Industry

Jakarta — The escalation of geopolitics in the Middle East is seen as potentially having a significant impact on the national automotive industry. Tensions between the United States and Israel against Iran, which triggered the blockade of the Strait of Hormuz since the end of February 2026, have become one of the main factors fueling these concerns. The Strait of Hormuz, in the view of experts, is one of the globe’s most vital crude oil distribution routes. When that route is disrupted, the impact is felt not only by countries in the conflict region but also by others that depend on the stability of global energy supplies. The rise in crude oil prices, he says, could trigger additional pressure on the domestic economy. This condition could become even heavier if accompanied by a depreciation of the rupiah against the US dollar. ‘And when combined with rupiah depreciation to around Rp 17,000 per US dollar, it creates a cost-push inflation storm that would have a large impact on Indonesia, even though we are far from the war zone,’ said Yannes. Moreover, the national automotive industry is currently highly connected to the global supply chain. Therefore, any disruption to international logistics distribution can directly affect production costs domestically. He assessed that rising logistics costs, energy for manufacturing processes, and potential shortages of imported components could add pressure for players in the national automotive industry. ‘This is predicted to potentially raise production costs by more than 5%, and if it rises further it could erode the margins of manufacturers and APMs, which in the end forces price increases amid weakening domestic purchasing power,’ he said.