Middle East Conflict Threatens Global Economy, Indonesia Braces for Impact
Escalating tensions in the Middle East are raising concerns about a potential expansion of the conflict, with significant implications for the global economy and Indonesia’s economic stability. As the crisis evolves, the potential for disruptions to energy markets and global trade routes is increasing, prompting Indonesia to prepare for economic headwinds.
Strategic Logic Behind Conflict Expansion
According to Murad Sadygzade, President of the Middle East Studies Center and Guest Lecturer at HSE University Moscow, the expansion of the conflict is not accidental but follows a strategic logic from Tehran’s perspective. Iran now views direct U.S. Involvement – through attacks, intelligence support, and military bases – as establishing Washington as an active participant in the conflict.
Sadygzade explains that Iran considers U.S. Military infrastructure throughout the region a legitimate target, extending the battlefield beyond Iranian airspace and Israeli territory to include logistical centers, command facilities, and transportation corridors in neighboring countries hosting U.S. Military assets.
Impact on the Global Economy and Energy Markets
The potential disruption to the global economy is substantial, given the Gulf countries’ central role in the international energy market. Vulnerabilities in oil infrastructure and key maritime routes, particularly the Strait of Hormuz, could lead to significant increases in world oil prices, higher shipping insurance costs, and decreased investor confidence.
Indonesia’s Economic Response
Indonesia is preparing to adjust its budget expenditure to maintain a fiscal deficit below 3% of GDP, as the conflict threatens to drive up oil prices and increase economic pressure. Indonesia’s Finance Minister Purbaya Yudhi Sadewa stated the government is ready to take action.
Approximately 20-25% of Indonesia’s crude oil imports originate from the Middle East. This reliance makes the country vulnerable to supply disruptions and price volatility.
Even prior to the current crisis, the Indonesian rupiah and stock index have been among Asia’s worst performers in 2026, with the currency weakening by over 1% against the US dollar and the stock exchange declining by as much as 7.5%, potentially jeopardizing President Prabowo Subianto’s economic goals.
Regional Security and Russia’s Mediation Role
The crisis is challenging long-held assumptions about the U.S.’s ability to guarantee the security of its Arab partners. Modern retaliation strategies are designed to penetrate defense systems and create economic uncertainty.
Russia has emerged as a key mediator, with President Vladimir Putin engaging in intensive communication with leaders of the United Arab Emirates, Qatar, Bahrain, and Saudi Arabia to de-escalate tensions. Russia maintains strategic partnerships with Iran and constructive relations with Gulf monarchies, positioning it uniquely to facilitate dialogue.
Moscow’s goal is to establish an informal information corridor to protect civil and energy infrastructure in the Gulf, preventing misperceptions that could lead to unintended targets.
Indonesia Monitoring Citizens in the Middle East
Indonesia is closely monitoring the safety of over 519,000 citizens residing in the Middle East, with the majority based in Saudi Arabia and 329 in Iran. The government is coordinating with Indonesian diplomatic missions to ensure their well-being, although Middle Eastern governments are currently not recommending evacuation.
Looking Ahead
The situation in the Middle East remains fluid, and unpredictable. Indonesia’s ability to navigate these challenges will depend on its proactive economic policies, diplomatic efforts, and continued monitoring of regional developments. The focus remains on de-escalation and protecting the global economy from severe disruptions to energy supplies and trade.