By Eko B. Supriyanto, Editor-in-Chief of Infobank Media Group
Last weekend, the world was shocked by a new escalation in the Middle East conflict. The joint U.S.-Israel strike on Tehran that killed Iran’s Supreme Leader, Ayatollah Ali Khamenei, has opened a new chapter in a broader war.
For Indonesia, the thousands of kilometers of distance are no longer relevant as a shield. In the global political economy, the tremors of war always find their way to our “home.” This time, there are at least four wounds that must be tended to: soaring oil prices, a struggling rupiah, squeezed credit, and tumbling stock prices.
According to a closed-door discussion at the Infobank Institute, there are at least four wounds that will continue to affect the Indonesian economy.
First, the Strait of Hormuz is not merely a point on a map. It is the lifeline of the global economy—20 percent of global oil consumption and 30 percent of LNG trade pass through there. When Iran threatens to block access, the market reacts. Not because supply is disrupted, but because a risk premium is attached to every barrel.
Many economists predict that oil prices could reach $100–120 if the conflict lasts more than two weeks.
For Indonesia, this isn’t just a number on a Bloomberg screen. Past experience shows that every rise in global oil prices drives up domestic fuel prices. Pertalite and diesel—used by the lower-middle class—are at risk of increasing. Inflation creeps up, and purchasing power erodes.
Indonesia, as a net oil importer, is affected not through direct trade—our exports to Iran amount to only 200 million US dollars a year—but through the oil channel: energy import costs are ballooning and subsidies are straining the state budget.
Second, as geopolitical uncertainty rises, investors flee from risky assets in emerging markets and return to safe havens—namely, the US dollar and gold. Infobank Institute estimates the rupiah could depreciate to Rp17,000 per US dollar. This is partly due to domestic factors such as fiscal issues and the independence of Bank Indonesia (BI) being undermined by “interference” from those in power.
This weakening is a double-edged sword. First, import costs are soaring—industrial raw materials and food prices are rising as well. Second, the burden of government and private foreign debt denominated in dollars is also increasing.
BI is caught between a rock and a hard place. Should it maintain exchange rate stability or raise interest rates to attract foreign capital? In a risk-off environment, stability is the priority. The room for monetary easing is closed, and the transmission of policy to the real sector is stalled.
Third, this conflict is shaking oil prices, which in turn affects import costs, subsidies, foreign exchange reserves, the balance of payments, and the exchange rate. All of this ultimately impacts the real sector and the banking sector.
The logic is simple. As fuel prices rise, production costs swell, and SMEs and corporations face liquidity pressures. Cash flow is disrupted, loan payments stall, and the non-performing loan (NPL) ratio creeps upward. Small businesses with thin margins and industries heavily reliant on imported raw materials are the most vulnerable.
The Financial Services Authority (OJK) has indeed reported a gross NPL of 2.05 percent through the end of 2025. But that data is a snapshot of the past. New pressures from the Iran-Israel conflict have not yet been reflected. This silent wave will arrive in the coming months.
Fourth, the stock market—the most visible and quickest-to-react channel—entered this week under heavy pressure. Major geopolitical escalations have always triggered risk-off sentiment in global markets.
Clearly, this conflict is weighing on the basic industries sector and sectors dependent on imported raw materials. China—Indonesia’s main trading partner—imports 13 percent of its oil from Iran. If supplies are disrupted, China’s energy costs will surge, its economy will slow, and demand for Indonesian exports will be hit as well.
It must be noted that pressure on the Composite Stock Price Index (IHSG) is coming from two sides. First, the potential for capital outflows as foreign investors reduce their exposure. Second, the risk of import inflation due to rising energy prices, which increase production costs for domestic issuers.
However, not all sectors are negatively affected. The oil and gas sector, in fact, could see a positive catalyst. Energy issuers are predicted to appreciate as revenue is expected to rise due to soaring oil prices.
The gold sector is also shining. Global gold prices have surged, and domestic precious metal prices are also creeping up.
The IHSG could test support at the 8,100–8,150 level and might even fall below 8,000 if pressure intensifies. However, the IHSG’s composition—which is heavily weighted toward commodity-based stocks—could act as a buffer. Rising gold and oil prices have the potential to stem the index’s decline.
The Iran-Israel war teaches an old lesson: in global political economy, national resilience cannot be measured solely by foreign exchange reserves or credit growth. It is measured by the readiness to withstand layered external shocks—in energy, monetary policy, banking, and capital markets simultaneously.
The government must be prepared for the worst-case scenario: oil prices remaining high above the state budget assumptions, the rupiah under continued pressure, NPLs beginning to rise, and the IHSG’s volatility testing investors’ resolve.
The Financial Services Authority (OJK) and the Bank of Indonesia (BI) need to be vigilant about the potential for increased credit risk, particularly in sectors most exposed to rising energy prices and a weakening rupiah. Strengthening energy reserves, stabilizing the exchange rate, and active diplomacy to de-escalate conflicts are imperative.
The Indonesian Employers Association (Apindo) reminds us to be vigilant but not to panic. The government needs to proactively monitor the resilience of the economy’s fundamentals and be more agile in creating productivity stimulus, particularly on the export and foreign investment fronts.
Ultimately, the war in the Middle East serves as a reminder: building economic resilience from within—through energy downstreaming, strengthening SMEs, deepening financial markets, and diversifying trade partners—is the best defense in an increasingly uncertain world.
These four “wounds” must be treated together to prevent them from becoming more severe infections. Indonesia remains on high alert due to the impact of the U.S.-Israel and Iran conflict. (*)
