Iran–Israel Conflict: Impact on Indonesia’s Economy and Logistics

The escalating tensions between Iran and Israel have rattled global markets, raising fears of disrupted oil supply, trade instability, and financial turbulence. As a major logistics and supply chain player in ASEAN, Indonesia must prepare for potential economic fallout.

1. Global Risks from the Iran–Israel Conflict

A. Oil Price Volatility & Supply Chain Disruption

Iran is a major oil producer. The conflict may disrupt shipments through the Strait of Hormuz (which handles 20% of global oil supply).
Rising oil prices will increase shipping, fuel, and global inflation costs.
Cargo ship insurance premiums in the Middle East may spike, affecting global logistics.

B. Trade Route Disruptions

Attacks on maritime routes (such as the Red Sea) could force ships to take longer detours, causing shipping delays and higher freight costs.
Indonesia’s exports (palm oil, textiles, electronics) and imports (machinery, raw materials) may face higher costs and delivery delays.

C. Financial Market Turbulence

Investors may shift capital from emerging markets (like Indonesia) to safe-haven assets (USD, gold), weakening the rupiah.
A weaker rupiah increases the cost of fuel and imported goods, reducing business profit margins.

2. Impact on Indonesia’s Economy

A. Rising Fuel Prices & Inflation
As a net oil importer, Indonesia will face:

Increased fuel subsidies burden (Pertalite, Solar).
Higher transportation and production costs.
Bank Indonesia may raise interest rates, slowing down economic growth.

B. Logistics and Bonded Zone Challenges

Higher shipping costs → rising import/export costs in bonded logistics zones.
Delays in raw material imports → disrupted production, especially for JIT-based factories.
Export competitiveness is at risk if logistics costs soar.

C. Impact on Migrant Workers & Foreign Investment

Over 6 million Indonesian workers reside in the Middle East; regional instability may reduce remittance flows.
Foreign investors may delay projects in Indonesia due to geopolitical and currency risks.

3. Strategies for Logistics & Business Players

A. Diversify Supply Chains

Explore alternative routes that avoid the Red Sea, such as via Africa.
Strengthen partnerships with local suppliers to reduce import dependency.

B. Hedge Against Fuel and Currency Risks

Use futures contracts to secure fuel prices.
Apply currency hedging to minimize rupiah volatility exposure.

C. Boost Efficiency in Bonded Zones

Digitize customs processes to speed up procedures.
Build up critical raw material safety stock.

D. Government Policy Recommendations

Accelerate the transition to renewable energy (solar, biofuel) to reduce oil dependence.
Upgrade port infrastructure to handle changing trade routes.
Provide fiscal incentives for logistics firms impacted by high costs.

4. Conclusion: Prepare for Uncertainty

The Iran–Israel conflict poses real risks to Indonesia’s economy and logistics sectors. But with proactive strategies, the impact can be mitigated.

Key Actions:
✅ Secure fuel supply early.
✅ Anticipate shipping delays — use alternative routes and suppliers.
✅ Hedge against rupiah volatility.
✅ Digitize and secure bonded zone operations.

With proper preparation, Indonesia’s logistics industry can stay resilient amid global turmoil.