Economic Impacts And Threats Of War

In a matter of days, global oil prices soared. The rupiah exchange rate was poised for pressure. Inflation was poised to surge. And it all stemmed from one point: Israel's counterattack on Iran.

"This geopolitical tension creates two immediate risks: rising commodity prices and a weakening global economy. This combination is very dangerous because inflation could rise even as growth slows," Finance Minister Sri Mulyani told the media. According to Sri Mulyani, the Israel-Iran war alone triggered a surge in oil prices of more than 8 percent, from below US$70 per barrel to US$78 per barrel. This must be monitored closely because it threatens the Indonesian economy.

Indonesia is not an oil-rich country. We are a net importer. This means that when global oil prices rise, we must pay more just to stay operational. Subsidy costs will automatically increase.

More worryingly, the Iran-Israel war is unlike any other conflict. This is a conflict between nuclear-armed states, with the Middle East as the main stage—a region that supplies 30% of the world's oil and controls vital global trade routes: the Strait of Hormuz and the Red Sea.

Several media outlets have reported that logistics costs in some shipping lanes have risen by 200%. Many cargo ships are reluctant to pass through the Red Sea and instead detour to the Cape of Good Hope, South Africa. The impact on Indonesia? The travel time for importing raw materials has increased by two weeks, and the prices of consumer goods have also risen.

Sea transportation could now become an economic minefield. No one can guarantee the safety of civilian ships in waters increasingly filled with US, British, Russian, and Iranian warships.

Bank Indonesia (BI) has also expressed concern over the rupiah's strengthening exchange rate against the US dollar. The dollar has become a "safe haven," and foreign capital is leaving emerging markets, including Indonesia.

More looming is the uncertainty of nuclear geopolitics. Israel's attack on Iran's nuclear facilities, as reported in the media, has damaged infrastructure in Bushehr. This isn't just war. It's a radiation risk. Moreover, Trump's involvement is palpable.

Indonesia is not standing idly by. In its statement, the Indonesian Ministry of Foreign Affairs warned that an attack on nuclear facilities could trigger a humanitarian disaster. Meanwhile, the evacuation of Indonesian citizens from Iran can only be done by land. Major countries like China have already evacuated 700 of their citizens.

We are learning, at great cost, that peace is not just a prayer. It is a real economic necessity. This is all the more frightening because the conflicting countries possess nuclear weapons. One lesson that should be remembered: The price of peace is far cheaper than the price of war.