TEMPO.CO, Jakarta - Indonesian Finance Minister Sri Mulyani Indrawati is wary of several possible impacts that may arise due to the Iran-Israel conflict on the Indonesian economy.
The escalation of conflict between the two countries in the Middle East, according to Sri Mulyani, has triggered a more than 8 percent surge in oil prices, from below US$ 70 per barrel to US$ 78 per barrel. Although oil prices have corrected to the level of US$ 75 per day, the Iran-Israel tensions have had a significant impact.
"This is an event that can directly affect the economic conditions very significantly, both through commodity prices and from the exchange rate, interest rates, and capital flows," said Sri Mulyani in a press conference on Tuesday, June 17, 2025.
Along with the escalation of conflict in the Middle East, according to Sri Mulyani, the expansive fiscal policy of the United States (US) also has the potential to cause negative sentiment towards the fiscal position of advanced countries. As a result, the yields of US government bonds are at risk of rising.
These disturbances pose two main risks, namely the uncertainty of oil prices and the global economic slowdown. "This is a combination that we need to be wary of, both the impact of price pressure or inflation and the increase in yields due to geopolitics and fiscal policy. Both of these cause impacts on the entire world, including Indonesia," said Sri Mulyani.
Domestically, according to Sri Mulyani, the impact of the Iran-Israel conflict could also burden the state budget. Although state revenue is potentially increasing from the absorption of the oil and gas sector, state spending will be under pressure due to the increased need for oil imports.
The state treasurer also stated that the realization of crude oil prices so far is still below the macro assumptions of the 2025 State Budget (APBN), at the position of US$ 62.75 per barrel at the end of May with a year-to-date average of US$ 70.05 per barrel. Meanwhile, the macro assumptions of the APBN are set at US$ 82 per barrel.
According to Sri Mulyani, the oil price is not only influenced by domestic conditions but also by the situation in the Middle East, namely the Israel and Iran war. "This is the APBN situation, the assumptions of which can be significantly influenced by global economic conditions and events of war in other parts of the world," she said.
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