As Oil Tides Rise: What the Strait of Hormuz Crisis Means for Indonesia

By Teguh Anantawikrama
Vice Chairman, Indonesian Chamber of Commerce and Industry (KADIN)
Chairman, Indonesian Tourism Investor Club

JAKARTA, investortrust.id - In our ever-interconnected world, a conflict in the Middle East can hit our wallets in Jakarta, Surabaya, or even on the islands of Maluku. One scenario that must not be ignored is the threat of a closure — even for a short time — of the Strait of Hormuz, the narrow passageway that carries nearly 20% of the world’s oil.

If tensions escalate and tankers stop moving, oil prices could shoot up overnight. Some experts warn Brent crude could soar to $120–150 per barrel. For Indonesia, a country still dependent on imported fuel and protective subsidies, this is a wake-up call — but not a reason to panic.

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Higher Costs — But Strong Fundamentals

An oil spike would raise our fuel import bills and put pressure on the rupiah. The government would face hard choices: pour more money into subsidies or allow fuel prices at the pump to creep up, squeezing family budgets.

Transportation, food distribution, and manufacturing costs would rise too. Inflation could edge higher, forcing Bank Indonesia to respond firmly. Yet we should remember: Indonesia has weathered oil shocks, currency swings, and global crises before. Our foreign exchange reserves, careful fiscal management, and resilient domestic market give us solid ground to stand on.

Keeping the Lights On

For many islands far from the big power grids, diesel generators are still vital. Soaring diesel prices would challenge PLN and communities alike. This is why our push for biodiesel — B35 today, B40 and B50 tomorrow — is more than just policy; it’s protection.

Equally important is our steady growth in renewables and electric vehicles. Every solar panel and EV on the road means less worry when global oil prices go wild.

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Tourism: Ready to Adapt

Tourism is one of our pride sectors — creating jobs and driving local economies. But it’s also sensitive to fuel costs. More expensive jet fuel means pricier tickets. This can deter both international visitors and local families planning holidays.

Hotels and tour operators would see their operating costs rise too. Inflation may dampen how much people spend on dining, shopping, and entertainment. On top of that, our key source markets like Australia, China, Japan, and India could cut back on long-haul holidays if household budgets tighten.

But we have an ace up our sleeve: domestic and regional travelers. During COVID-19, it was Indonesians who kept local destinations alive. Now, better infrastructure and digital promotions make it easier than ever to attract short-haul ASEAN visitors who see Indonesia as an affordable, nearby escape.

Turning Shock Into Strength

We can’t control geopolitical tensions far away, but we can control how prepared we are at home. What should we do if the Hormuz strait ever closes?

- Protect vulnerable households with targeted subsidies or direct aid.
- Keep macro stability strong with enough FX reserves and smart monetary policy.
- Speed up domestic oil production and expand biodiesel use.
- Build up fuel stockpiles and secure distribution to all islands.
- Support tourism players with incentives, cooperative airline deals, and value-for-money packages.
- Double down on clean energy and efficiency — because every kilowatt we produce locally is a shield against global oil spikes.

Indonesia has proven, time and again, that we bounce back stronger from every storm. We are a vast nation, rich in resources, powered by the creativity of our people. If global oil prices surge because of a crisis far away, we will adapt, protect our communities, and turn the challenge into momentum for a more secure and sustainable future.

June 23, 2025