During a press conference, she noted that the escalation of the conflict in the Middle East has driven oil prices up by more than 8 percent—from under US$70 per barrel to US$78 per barrel.
Although prices have since corrected to around US$75 per barrel, the Iran-Israel tensions have had a significant influence, she said.
“This is a development that can directly affect economic conditions in a profound way—through commodity prices as well as exchange rates, interest rates, and capital flows,” she explained.
She further noted that the expansionary fiscal policy of the United States could shift fiscal sentiment toward developed countries, potentially leading to higher yields on U.S. Treasury securities.
According to Indrawati, these factors present two major risks: oil price volatility and broader global economic weakness.
“That’s a combination we must closely monitor—both the inflationary pressure from rising prices and the increase in yields stemming from geopolitical tensions and fiscal policy. These dynamics impact the entire world, including Indonesia,” she said.
She also pointed out that the fallout from the Iran-Israel conflict could place additional pressure on the State Budget.
While state revenues from oil and gas may increase, expenditures could be strained due to Indonesia’s dependence on imported oil.
At the end of May 2025, oil prices stood at US$62.75 per barrel—still below the 2025 State Budget’s macroeconomic assumption of US$82 per barrel. The average year-to-date price in May was recorded at US$70.05 per barrel.
“The price of oil is affected not only by domestic factors, but also by developments in the Middle East—especially the conflict between Israel and Iran,” Minister Indrawati stated.
“This is the fiscal outlook we are dealing with—an outlook that is highly sensitive to global economic trends and conflicts taking place in other parts of the world,” she concluded.
Related news: Government confirms Indonesians safe in Iran, Israel
Related news: Indonesia should be wary of Israel-Iran conflict's impact
Translator: Imamatul Silfia, Yashinta Difa
Editor: Aditya Eko Sigit Wicaksono
Copyright © ANTARA 2025
