War Effect: Fuel Price Rises and Government Programme Efficiency Becomes Unavoidable

Jakarta – Conflict in the Middle East involving Iran, the United States, and Israel is beginning to trigger concerns about global economic stability.

A surge in global crude oil prices has become the most direct consequence of escalating geopolitical tensions. This situation also carries the potential to place pressure on Indonesia’s economy through energy price channels, rupiah exchange rates, and fiscal stability.

The Prasasti Center for Policy Studies views the conflict escalation as a risk of becoming a new source of external pressure on Indonesia’s economy in 2026. One major risk stems from potential disruptions at the Strait of Hormuz, a strategic passage through which approximately 20 to 30 per cent of the world’s oil trade flows.

Policy and Programme Director at Prasasti, Piter Abdullah, stated that the main impact of the conflict can be seen from the surge in global crude oil prices. Rising global energy prices also have the potential to disrupt international logistics supply chains.

“Rising oil prices will cause the potential for increased domestic fuel prices,” said Piter during an Exclusive Interview discussion on the Impact of Iran-US Conflict Escalation on Indonesia on Thursday (12 March 2026).

He assessed that surging oil prices have the potential to trigger inflation increases if domestic fuel prices rise accordingly. Additionally, international trade activity is estimated to slow, which could pressure government tax revenues.

Another vulnerability that has emerged is the limitation of national strategic energy reserves. Piter explained that Indonesia’s strategic oil reserves are estimated to be sufficient to support only approximately 23 to 26 days of needs.

This figure falls far below the International Energy Agency standard, which recommends reserves equivalent to 90 days of net imports.

“When geopolitical conflict occurs in a region that serves as a major global energy trading route, import-dependent nations such as Indonesia must be more cautious. Limited energy reserves make policy room for manoeuvre narrower if global supply disruptions occur,” said Piter.

Rising energy import requirements can increase pressure on Indonesia’s external balance.

“When energy prices rise and global uncertainty increases, pressure on the rupiah exchange rate typically rises as well. This is not only influenced by domestic factors but also by the dynamics of global capital movements,” Piter stated.

This pressure can also seep into the government’s fiscal position. The structure of the State Budget still remains sensitive to fluctuations in global oil prices.