Hormuz Crisis Jolts Indonesia: Soaring Oil Prices Strain Budget, Expose Economic Vulnerabilities

The recent military actions in the Strait of Hormuz, initiated by the United States and Israel and met with retaliation from Iran's Islamic Revolutionary Guard Corps, have sent shockwaves through the global economy, with Indonesia feeling the impact acutely. The closure of this vital waterway, through which a significant portion of the world's oil passes daily, has triggered a sharp increase in oil prices, far exceeding the assumptions used in Indonesia's 2026 State Budget.

“

For Indonesia, this is not just news from afar. The 2026 State Budget was prepared based on an assumption of oil prices at 70 US dollars (USD) per barrel. The Hormuz crisis pushed Brent prices to surge to the range of 112 to 126 USD per barrel.

This surge in oil prices, from an assumed $70 per barrel to potentially $112-$150 per barrel, places an immense burden on the Indonesian economy. Our national budget faces an additional expenditure of approximately Rp10.3 trillion for every $1 increase above the assumed price, potentially reaching Rp544 trillion in additional energy subsidies alone. The Rupiah has weakened considerably against the US dollar, and national fuel reserves are critically low, far below international standards, raising concerns about energy security.

“

A CELIOS simulation shows that every $1 increase per barrel above the State Budget assumption adds to the state's expenditure burden by around Rp10.3 trillion. In a scenario of $150 per barrel, the additional burden of energy subsidies could reach Rp544 trillion.

The crisis is a stark reminder of Indonesia's structural weaknesses, particularly its over-reliance on global market fluctuations and geopolitical stability. As the world's most populous Muslim nation, Indonesia possesses vast untapped economic potential within its own community – through pesantren networks, productive waqf funds, and a growing halal industry. Yet, these assets have not been fully leveraged to build national economic resilience.

“

The Rupiah exchange rate also weakened to the range of Rp16,893 to Rp17,000 per US dollar. More worrying: national fuel reserves are only sufficient for about 20 days, far below the International Energy Agency's recommended standard of 90 days.

From the perspective of Islamic economics, this situation calls for a fundamental shift towards greater self-sufficiency and internal economic strength. Concepts like 'maslahah' (public interest) and 'iqtisad' (economy) emphasize building resilience from within, through fair distribution and strong solidarity networks, rather than depending on volatile global supply chains. The potential of Islamic finance and economics to provide a more stable and equitable foundation for Indonesia's economy deserves serious consideration, especially in times of global uncertainty.

“

Indonesia, the country with the largest Muslim population in the world, builds its economic system on a foundation that is too dependent on global market fluctuations vulnerable to geopolitical shocks. It's like building a house on sand: when the storm comes, the foundation feels very fragile.