Strait of Hormuz Closure Threatens Indonesian Energy Security
The escalating conflict in the Middle East and the effective closure of the Strait of Hormuz are creating significant risks for Indonesia’s energy security and economic stability. With approximately 25% of the nation’s oil imports transiting the strait, and domestic fuel reserves sufficient for only around 20 days, Indonesia faces a precarious situation as global oil prices surge and the rupiah weakens.
Critical Energy Chokepoint
The Strait of Hormuz, a narrow waterway between Iran and Oman, is one of the world’s most strategically important energy chokepoints. In 2024, around 20.3 million barrels per day (mbpd) of oil – nearly one-fifth of global consumption – passed through the strait [1]. Approximately 291.49 million cubic meters of Liquefied Natural Gas (LNG) too transited the strait during the same period [1]. Its narrowest point is only 33 kilometers wide, making it exceptionally vulnerable to disruption during regional conflicts [2].
Impact on Oil Prices and Indonesian Economy
The recent US-Israeli war with Iran has triggered a sharp increase in oil prices. On March 9, 2026, both Brent and West Texas Intermediate (WTI) crude oil futures briefly reached $119.5 and $119.48 per barrel, respectively, following production cuts by Arab Gulf states [3]. While prices subsequently eased, they remain elevated, particularly after US President Donald Trump’s pledge to seize control of the Strait of Hormuz. Brent crude futures closed down 4.6 percent at $88.43 per barrel, and WTI settled 6.19 percent lower at $85.27 [3].
Rising oil prices pose a significant fiscal risk to Indonesia. The 2026 state budget is based on an average crude oil price of $70 per barrel. Bank Mandiri estimates that each $1 increase in crude prices will add approximately Rp 10.3 trillion ($608 million) to energy subsidies and compensation costs, while increased tax and royalty revenues will only reach around Rp 3.5 trillion.
Inflationary pressures are also expected to rise. A 10 percent increase in the price of Pertalite (RON 90 gasoline) could push up inflation by 0.27 percentage points, while a similar increase in subsidized diesel (Solar) could raise inflation by around 0.05 percentage points.
Limited Fuel Reserves and Supply Disruptions
Indonesia’s current fuel stockpile provides a consumption buffer of only 20-25 days, falling short of the 90-day net import reserve recommended by the International Energy Agency (IEA). In 2024, domestic fuel consumption totaled 82.9 million kiloliters (kL), or roughly 227,136 kL per day. Existing reserves are primarily intended for daily operational needs, and limited storage capacity restricts the country’s ability to maintain strategic petroleum reserves.
Specific fuel products have particularly low reserve levels: Liquefied Petroleum Gas (LPG) has only 15 days of reserves, while diesel has around 18 days. Pertalite (RON 90) has a 19-day buffer, RON 92 gasoline 26 days, and both RON 98 gasoline and jet fuel around 29 days. Other fuels have slightly longer reserves, including marine fuel oil (33 days), kerosene (38 days), and cetane number (CN) 53 diesel fuel (39 days).
Panic Buying and Regional Disruptions
Public awareness of potential fuel supply disruptions, coupled with official acknowledgement of limited national reserves, has triggered panic buying in several regions, exacerbating existing supply disruptions in Aceh, North Sumatra, and Riau since early March. This surge in demand is further straining supply chains, particularly as fuel consumption typically increases ahead of Idul Fitri. Pertamina had previously projected gasoline demand during the holiday season to increase by around 12 percent compared to normal levels.
Looking Ahead
The administration of President Prabowo Subianto faces mounting pressure to secure alternative fuel supplies and stabilize domestic markets. Addressing the vulnerabilities exposed by the Strait of Hormuz crisis will be crucial for Indonesia’s energy security and economic resilience in the coming months.