The surge in oil prices due to the attack on Iran could put pressure on the state budget and trigger inflation.

JAKARTA, KOMPAS — The coordinated attacks by the United States and Israel on several regions in Iran on Saturday (28/2/2026) have exacerbated tensions that had already escalated due to the deadlock in negotiations regarding Tehran's nuclear program. This escalation of conflict has driven up global oil prices and triggered concerns over fiscal stability and domestic inflation.

Tensions have escalated after several Iranian state media confirmed that Iran's Supreme Leader, Ayatollah Ali Khamenei, has passed away following his peace efforts becoming the target of the combined attack. This latest event increases the risk of retaliation and exacerbates uncertainty in the Middle East.

Chief Economist of Bank Mandiri, Andry Asmoro, in his statement on Sunday (1/3/2026), stated that this situation impacts the condition of the commodity market, one of which is global oil that is now preparing to face higher price volatility.

The price of Brent crude oil is currently around US$72.8 per barrel, a significant increase from the US$60.9 per barrel at the start of the year. Brent is a type of crude oil produced in the North Sea in Europe and serves as the global benchmark for two-thirds of the world's oil supply.

"The pressure could increase if there is an escalation or retaliatory action that disrupts supplies, especially through the Strait of Hormuz," Andry said.

Quoting Reuters, Iran, which controls the Strait of Hormuz, has not confirmed that it is banning ships from passing through. However, the Iranian government has repeatedly threatened to close the strait if an attack on Iran occurs.

Meanwhile, information from the European Navy indicates that ships are no longer allowed to pass through the Strait of Hormuz after Iran was attacked by Israel and the United States. Hundreds of civilians have become victims of the attack.

The Strait of Hormuz is a strategic waterway through which approximately 20 percent of global oil trade and 20-25 percent of global LNG (Liquefied Natural Gas) trade pass. Disruptions to this route have the potential to further increase international energy prices.

The conflict experience between Iran and Israel on June 19, 2025, resulted in sensitivity in the commodities market. At that time, oil prices surged from 69.4 USD per barrel to 78.9 USD per barrel in a short period, although the pressure then decreased as the conflict subsided.

However, Andry assesses that the current risks are more complex. A prolonged rise in oil prices could hinder the global disinflation trend, delay the easing of monetary policy in developed countries, and suppress the prospects for global economic growth.

For Indonesia, which is still a net importer of oil, the surge in energy prices poses a serious challenge. In the 2026 State Budget, the oil price assumption is set at 70 US dollars per barrel. Meanwhile, the average Brent price for the current year has reached 72 US dollars per barrel.

Based on the fiscal sensitivity analysis by Bank Mandiri, every increase of 1 US dollar in oil prices has the potential to add to the burden of energy subsidies and compensation in the state budget by Rp 10.3 trillion. Conversely, the additional tax and royalty revenue is only around Rp 3.5 trillion.

"If oil prices remain above the assumptions in the state budget, the government has the potential to increase subsidized fuel prices. This will certainly impact domestic inflation," said Andry.

He estimates that every 10 percent increase in the price of Pertalite could add approximately 0.27 percentage points (ppt) to inflation. Meanwhile, a 10 percent increase in the price of diesel has the potential to add around 0.05 ppt to inflation.

From the perspective of the financial market, global volatility can also trigger pressure on the value of the rupiah. By comparison, the Iran-Israel conflict last year caused the rupiah to depreciate by more than 2 percent.

In the week following the latest turmoil in the Middle East, the rupiah is projected to move within the range of Rp 16,800–17,000 per US dollar, with the potential for further intervention by Bank Indonesia to maintain stability.

The founder and CEO of Supply Chain Indonesia (SCI), Setijadi, provided a more detailed explanation regarding the relationship between rising fuel prices and inflation of goods through logistics costs. According to him, the increase in oil prices is a consequence of the potential disruptions in the Strait of Hormuz.

This price change will affect, among other things, the domestic diesel prices, which are a key component of the operational costs of road transportation that still serve as the backbone of the national logistics system.

"Assuming that the fuel component accounts for 35-40 percent of the total operating costs of trucks, a 10 percent increase in diesel prices could lead to an increase in transportation costs of approximately 3.5-4 percent," said Setijadi in his press release.

If the price of diesel increases by 20 percent, truck costs could potentially rise by 7-8 percent. In a more severe scenario, a 30 percent increase in diesel prices could trigger a surge in transportation costs of 10.5-12 percent.

Setijadi said that sensitivity to diesel prices is relatively high because Indonesia's logistics structure relies on road transportation that uses diesel.

The average logistics cost in Indonesia is estimated to be around 14 percent of the product price. Approximately half of this cost comes from road transportation. An increase in truck fares by 7-8 percent could potentially raise the average price of goods by about 0.5 percent.

Finally, the biggest risk is inflationary pressure on distribution costs, particularly for food commodities and basic necessities.

"In extreme conditions, an increase in transportation costs above 10 percent can drive up the prices of goods by nearly 0.8 percent, especially for food commodities, building materials, and fast-moving consumer goods with thin margins," he explained.

Import-based raw material industries, according to him, also face dual risks, namely rising import costs due to soaring oil prices and increased domestic distribution costs. The construction sector and micro, small, and medium enterprises (MSMEs) are also considered vulnerable due to high transportation costs and limited profit margins.

SCI also encourages the government to maintain fuel price stability through adaptive fiscal policies and to accelerate energy diversification. Strengthening multimodal connectivity, particularly the optimization of sea and rail transport, is considered crucial to reduce sensitivity to fluctuations in diesel prices amid increasing geopolitical turmoil.

"Without structural reform of the logistics system, any external turmoil risks being directly translated into domestic price pressures and a weakening of the purchasing power of the community," he said.