Jakarta, 2 March 2026 – Escalating US–Iran tensions have heightened global uncertainty, pushing energy markets into renewed volatility. For Indonesia, the risk does not stem from oil prices alone. The pressure intensifies when rising global energy prices coincide with exchange rate instability.

Prasasti Center for Policy Studies notes that the combination of higher oil prices and potential rupiah depreciation against the US dollar creates compounded macroeconomic strain. Since Indonesia imports a significant portion of its energy needs in dollar-denominated transactions, a weaker rupiah increases import costs—even if oil prices stabilize at elevated levels.

Policy and Program Director Piter Abdullah explained that the dual shock scenario poses a clear risk. “When oil prices rise and the rupiah weakens at the same time, the pressure multiplies. The impact is not linear—it becomes amplified through import costs,” he said.

In such conditions, higher import bills translate into either expanded fuel subsidies or upward adjustments in domestic fuel prices. Both options carry trade-offs: increased fiscal burden on the one hand, or rising inflationary pressure on the other.

The transmission mechanism extends beyond direct fuel costs. Rising energy import expenses feed into transportation and logistics, which in turn affect broader consumer prices. As cost pressures spread, inflation expectations may shift upward, potentially prompting tighter fiscal or monetary responses.

The policy challenge lies in coordination. Fiscal authorities must manage subsidy exposure and maintain budget discipline, while monetary authorities work to stabilize the exchange rate and anchor inflation expectations. Weak coordination risks amplifying volatility rather than containing it.

At present, Prasasti assesses that the primary concern remains price transmission rather than large-scale physical supply disruption. There are no immediate signs of structural supply breakdowns, but sustained cost pressures alone are sufficient to create meaningful economic strain.

Indonesia’s resilience ultimately depends on macroeconomic discipline. Energy import dependence and currency sensitivity are structural characteristics that cannot be resolved quickly. What remains within policymakers’ control is responsiveness—careful calibration of subsidies, prudent exchange rate management, and timely measures to prevent temporary geopolitical shocks from evolving into broader inflationary instability.