Indonesia's economy minister says the country can endure the impact of rising oil prices, spurred by the US-Israeli conflict with Iran, for as long as 10 months without cutting fuel subsidies. The government is also seeking alternative oil sources amid the global turmoil.
Riders with vehicles queue to refuel at a Pertamina petrol station in Depok, on the outskirts of Jakarta, Indonesia, as the Indonesia n government announces limits on subsidised fuel sales to counter the impact of the US-Israeli conflict with Iran. This scene, captured on March 31, 2026, reflects the palpable concern across the nation following the surge in global crude prices.
The escalating conflict has sent ripples through the Indonesian economy, forcing the government to navigate a complex balancing act between providing affordable fuel to its citizens and maintaining fiscal stability. The recent strikes by the United States and Israel on Iran, beginning February 28, have triggered a region-wide conflict and effectively closed the vital Strait of Hormuz, a crucial artery for global oil transport. This geopolitical instability has directly impacted Indonesia, a nation heavily reliant on imported oil.
Indonesia's economy minister, Airlangga Hartarto, announced on April 13 that the nation is prepared to withstand the economic strain of soaring oil prices, fueled by the Middle East conflict, for up to ten months without curtailing fuel subsidies. Minister Hartarto affirmed the government's commitment to subsidising diesel and propellant until the end of the year, assuring that sufficient funds are allocated.
The government's subsidy program, covering approximately 30 to 40 percent of the cost for consumers, consumes over 5 percent of the nation's annual budget. The estimated cost of the subsidy amounts to roughly 210 trillion rupiah (US$12 billion) annually. Jakarta's financial plans for 2026 were based on a projected global oil price of US$70 per barrel. The government is legally bound to keep the fiscal deficit below 3.0 percent of GDP.
Minister Hartarto also noted that every US dollar increase in the global oil price places an additional burden of about 6.8 billion rupiah (some US$400 million) on the state budget, highlighting the significant financial pressure. In response to the crisis, Indonesia is actively seeking alternative oil sources in Africa, the United States, and Venezuela.
Approximately one-fifth to one-quarter of Indonesia's oil imports originate from the Middle East, underscoring the urgency of diversifying supply chains to mitigate risks associated with the ongoing conflict.
The government's strategy hinges on the duration of the war. Minister Hartarto criticised US President Donald Trump for his inconsistent approach to war and peace, while also revealing that President Prabowo Subianto was in Moscow on Monday for oil-related discussions with Russian President Vladimir Putin. Minister Hartarto declined to provide specifics about the Moscow talks.
President Subianto aims to boost Indonesia's economic growth rate from 5.1 percent last year to 8 percent by 2029, a goal fueled by increased public spending. However, the World Bank recently revised its 2026 growth projection for Indonesia downward, from 4.8 percent last October to 4.7 percent, reflecting the economic headwinds.
Minister Hartarto emphasized that Indonesia is somewhat protected from the broader economic repercussions through its commodity exports, including coal, rubber, nickel, copper, and aluminium. This diversified export base provides a degree of insulation from external shocks.
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