The on-going conflict in the Middle East poses significant threat to the Indonesia’s economy. The effect depends on how long the conflict would take place; but broad base impact would be negative and detrimental if the conflict takes longer than a few weeks. The main transmission channels are higher oil and gas prices, more expensive shipping or even logistical disruption, imported inflation, rupiah volatility, and pressure on the state budget.

The reason behind the market shock is clear. The latest escalation has disrupted oil production and tanker movements around the Strait of Hormuz. On March 9, 2026, Brent seRled at $85.41 and WTI at $81.01, levels that could easily rise above $100 per barrel if disruptions persist. At the same time, major shipping lines have continued rerouting vessels away from the Red Sea– Suez corridor and imposing conflict surcharges, increasing freight costs and delivery times. Even before the current aRack on Iran, traffic through the Suez Canal had already fallen significantly, to roughly one-fourth of its pre-October 2023 crisis level.