Tensions in the Middle East have flared up again. Relations between countries have heated up amid military attacks and are now affecting world trade routes passing through the Strait of Hormuz. Not only is it happening in the countries involved, but it is also creating ripple effects across the global economy, including in Indonesia.
The impact of the war in the Middle East on Indonesia’s economy is already visible in energy supply chains, soaring global oil prices, and the threat of a decline in tax revenues.
Strait of Hormuz’s Trade Routes Disruption
Escalating tensions in the Middle East have disrupted transport routes through the Strait of Hormuz. Some oil tankers have reportedly been hampered from passing through the strait, which is one of the world’s main shipping routes linking energy suppliers to markets in Asia. Consequently, concerns over fuel supply shortages emerge in several countries.
The strait’s role in Indonesia’s energy supply trade chain is noteworthy. Indonesia transports around 20% – 25% of its oil imports through the Strait of Hormuz. Meanwhile, about 20.4% of Pertamina’s oil imports also pass through this separating strait between Iran and the United Arab Emirates.
This dependency stems from the fact that Pertamina’s crude oil supply remains dominated by Middle Eastern producers, such as Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq.
Indonesia’s Trade with Gulf Countries
According to data released by Statistics Indonesia in 2025, Indonesia has a trade surplus with Gulf countries. This suggests that Indonesia’s exports to these countries exceed its imports.
Indonesia’s exports to the Gulf countries mainly consist of vegetable oil, vehicles, precious metals, iron and steel, chemicals, and fruits. In total, Indonesia’s exports to the Gulf countries stand at approximately USD 4 billion.
War-Driven Rise in Global Oil Prices
The threat to the energy supply trade chain from the Middle East has also pushed up world oil prices. Since the Gulf War intensified, crude oil prices have also notably increased.
Quoted from OilPrice, the price of Brent crude futures surged 8.52% to USD 92.69 per barrel, while WTI crude futures in the United States rocketed 12.2% to USD 90.90 per barrel. This condition may put additional pressure on countries that depend on oil imports, such as Indonesia.
Rising Domestic Inflation Pressures
Although not directly involved in the Middle East conflict, Indonesia still feels the impact. The rise in oil prices and disruptions to global trade routes could raise domestic inflation.
From an economic standpoint, if fuel prices and transportation costs rise, the prices of other goods, including food, will usually rise as well. According to Bank Indonesia’s records, inflation has indeed increased in the last three months:
- December 2025: 2.92%
- January 2026: 3.55%
- February 2026: 4.76%
These figures indicate that price pressures in the country are currently more pronounced.
Volatility in Financial Markets
In addition to the real sector, the war in the Middle East also impacts the financial market. The financial market is vulnerable to geopolitical risks and threats to global security. When pressure in a country increases, market participants typically allocate their investment funds to safe-haven assets such as gold and other precious metals.
This is evident in the weakening of the IDX Composite Index, reflecting volatility in the country’s financial markets.
Potential Impact on Tax Revenue
From a tax perspective, the Middle East conflict can also affect state revenues. This risk is present because part of Indonesia’s tax revenue is still commodity-based, such as from the coal, tin, and nickel industries.
Indonesia’s reliance on commodity prices and sales volume to achieve tax realization targets makes it highly vulnerable to disruptions and global market conditions. If transportation costs increase and global commodity trade slows, commodity sales will decrease. As a result, tax revenue may decrease.
Economic Slowdown Dampens Consumption
If inflation increases and economic growth slows, public consumption will also weaken. When purchasing power declines, the wheels of the country’s economy slow.
Thus, although Indonesia is not directly involved in the Middle East conflict, the economic consequences remain significant. Disruptions of world trade routes, rising oil prices, inflationary pressures, and volatility in financial markets could all weigh on the country’s economy. These developments will also affect Indonesia’s long-term tax revenue performance.
Also Read:
https://ideatax.id/articles/article-26-withholding-tax-on-foreign-taxpayers
