Impact of the Iran War on the Indonesian Economy

JAKARTA - The war in the Middle East involving the United States-Israel and Iran is thousands of kilometers away from Indonesia, but the impact can be felt in the kitchen.

The joint military attack by the US and Israel against Iran since Saturday (28/2/2026) is believed to have a wide impact on other countries, including Indonesia. The reason is that this operation, which is called Operation Epic Fury, not only triggered Iran's retaliatory attacks, but also the announcement of the closure of the Strait of Hormuz.

Brigadier General of the Islamic Revolutionary Guard Corps (IRGC) of Iran (IRGC) Ibrahim Jabari deployed his troops to close the Strait of Hormuz amid the heating up of the situation in the Middle East region. Jabari emphasized that no ship should pass during the closure.

"Currently, the Strait of Hormuz is being closed by IRGC forces following the attack on Iran," Jabari told Lebanese media Al-Mayadeen, Saturday (28/2) local time.

The closure of the Strait of Hormuz is believed to have a major impact on Indonesia's economy. The reason is that the Strait of Hormuz is a vital route for world oil trade in southern Iran, passing 20 percent of the world's oil supply.

According to data from the Central Statistics Agency (BPS), in January 2026 Indonesia's oil and gas imports from the Middle East are still running normally. Saudi Arabia was recorded as the largest supplier with a value of 267.4 million US dollars, followed by the United Arab Emirates at 200.6 million US dollars. This means that Indonesia's dependence on Iran is small. But the problem is not the exporting country, but on the distribution channel.

The Executive Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira said that millions of Indonesians could feel the economic impact of the Iran-Israel and US wars. The main impact will be felt from the increase in world oil prices and the potential for further depreciation of the rupiah.

Bhima projected that the closure of the Strait of Hormuz could raise oil prices to a range of US$100 to US$120 per barrel. This condition is exacerbated by the refusal of insurance applications by various logistics ships that pass through the conflict area.

"This situation causes difficulties in importing oil for many countries," said Bhima.

As a net oil importer, the increase will be felt strongly. In the simulation of the State Budget (APBN) 2026, it was noted that an increase of every 1 US dollar per barrel of oil above the APBN assumption, 70 US dollars per barrel, would add 10.3 trillion rupiah to the state's spending.

According to his calculations, an increase in oil prices to 100 US dollars or even 120 US dollars per barrel can increase state spending by up to Rp515 trillion.

In addition, geopolitical tensions also trigger concerns about the emergence of the phenomenon of flight to quality or investor actions shifting from risky assets to safer assets, such as gold. This, said Bhima, can cause the rupiah to weaken further.

Celios also highlighted the phenomenon of gold rush which is still happening. Global gold prices have risen 48.4 percent in the past six months, one of which was triggered by the heating of conflict tensions in the Middle East.

And, due to the disruption of the global supply chain due to the Middle East conflict, Celios assessed the potential for an increase in the prices of a number of staple food commodities such as chicken, eggs, rice, and vegetables. Moreover, with the Free Nutritious Meal program

This condition is considered risky to suppress people's purchasing power, especially the middle class. Thus, disposable income has the potential to shrink.

"Food is vulnerable to being affected, especially those that are sensitive to fluctuations in exchange rates and disruptions in the import chain, such as soybeans, wheat, and meat," said Bhima.

"For Indonesian citizens who hold rupiah, inisihcobaan," he continued.

The Syiah University of Development Studies Professor of Economics, Apridar, said the joint US-Israeli attack on Iran had changed the global geopolitical map in an instant. However, the size of the impact will depend heavily on the duration of the conflict.

If the war only lasts a short time, such as a matter of days, then the impact will be limited to temporary turmoil. The JCI may correct 2-4 percent, and the rupiah will crawl up, but it will not interfere with the growth target.

When global investors are active in quality, US bond yields fall, and this can trigger capital inflows into the Indonesian Government Securities (SBN) market which offers high yield returns.

But if the conflict continues, it could have a worse impact. In line with Bhima, Apridar said there was a threat of a subsidy burden swelling to Rp50 trillion to Rp80 trillion if only oil lasted above US$200 for more than a month.

"The state budget deficit will widen, inflation could be pushed back to above 4 percent, the purchasing power of the middle class will be eroded. In a very extreme scenario, economic growth could be threatened," he said.

"The war in the Middle East is indeed thousands of kilometers away from Jakarta, but the impact is felt at gas stations, in the capital market, and in the calculation of the state budget. This crisis is a real test for Indonesia's economic resilience," Apridar concluded.