The Strait of Hormuz crisis is Indonesia’s economic test |
With the Strait of Hormuz now effectively disrupted, the world is entering a new phase of energy insecurity. For Indonesia, the consequences are not hypothetical. They are already unfolding—through rising fuel costs, a weakening currency, and mounting pressure on a fragile fiscal system.
Roughly a fifth of global oil supply passes through Hormuz. Any sustained disruption sends immediate shockwaves through crude markets, and those shocks are now feeding directly into Indonesia’s domestic economy. Despite years of subsidy reform, the country remains structurally exposed to global oil price volatility. As prices climb, the government faces mounting pressure to adjust fuel prices, subsidized liquefied petroleum gas (LPG)—especially the widely used 3-kilogram cylinders—and potentially electricity tariffs. The result is a rapid escalation in the cost of living, with middle- and lower-income households bearing the brunt.
This is not merely an energy story. It is an inflation story—and a dangerous one. Indonesia is simultaneously confronting the risk of prolonged drought linked to a potential super El Niño. Agricultural output is under threat just as fertilizer prices rise due to disruptions in petrochemical supply chains and surging logistics costs.
The convergence of energy inflation and food inflation is a volatile mix, one that has historically triggered social and economic instability across emerging markets.
The convergence of energy inflation and food inflation is a volatile mix, one that has historically triggered........