War : Survivors, Memory, and Moral Responsibility (15)

In Indonesia, the relationship between rising global oil prices, the Indonesian state budget (APBN), and the continuation of the Makan Bergizi Gratis (MBG) programme illustrates a delicate interaction between economic constraints and political legitimacy. When international oil prices rise, countries that maintain fuel subsidies—such as Indonesia—often experience immediate pressure on their public finances. Fuel subsidies become more expensive because the government must spend more to keep domestic fuel prices lower than international market prices. In such circumstances, any additional large-scale social programme, including MBG, inevitably becomes part of the broader fiscal equation because it competes for the same limited budgetary resources.

If global oil prices continue to increase, the Indonesian government led by Prabowo Subianto will likely face a strategic fiscal dilemma. The state must decide whether to maintain high levels of fuel subsidy spending, finance social programmes such as MBG, or redistribute funds between the two. The APBN cannot indefinitely absorb simultaneous increases in both subsidy costs and large new social expenditures without either increasing public debt, cutting other programmes, or raising state revenues. In practice, governments often attempt to manage this pressure by reducing fuel subsidies or allowing domestic fuel prices to rise.

However, reducing fuel subsidies while continuing to fund a politically visible programme such as MBG could generate complex social reactions. Fuel prices have historically been one of the most sensitive economic issues in Indonesia because they affect the price of transport, food distribution, and basic commodities across the entire economy. When fuel prices increase, the effect is not limited to motorists; it cascades through the supply chain and contributes to broader inflation. Households, therefore, feel the impact quickly and directly in their daily expenses.

In such a situation, the perception of fairness becomes politically crucial. If the government reduces fuel subsidies—thereby increasing the cost of living for millions of households—while simultaneously maintaining or expanding a costly national programme like MBG, some segments of society may interpret the policy combination as contradictory. Even if MBG is designed to benefit the public, the public discourse could shift towards questioning whether state resources are being allocated efficiently. When public narratives begin to associate a programme with bureaucratic inefficiency or potential corruption, the symbolic meaning of that programme can change dramatically.

This dynamic illustrates a broader principle in political economy: social unrest often arises not only from economic hardship but also from perceived injustice in how policies are prioritised. When citizens feel that they are being asked to bear rising costs—such as higher fuel prices—while suspecting that government programmes are poorly managed, trust in public institutions may erode. In such an atmosphere, political dissatisfaction can become a rallying point for broader grievances unrelated to the original policy decision.

Nevertheless, it is important to recognise that the risk of social conflict does not arise automatically from subsidy reductions alone. Public reactions often depend on how policies are communicated and implemented. Governments that successfully explain the fiscal necessity of subsidy reforms, while simultaneously demonstrating transparency in social programmes, sometimes manage to avoid large-scale unrest. Conversely, when policy changes appear abrupt or poorly justified, they may amplify existing political tensions.

Another factor is the distributional impact of both policies. Fuel subsidy reductions typically impose immediate costs on the general population, while a targeted programme such as MBG distributes benefits more narrowly to specific groups, particularly schoolchildren and vulnerable households. If the broader population experiences higher living costs without feeling that they benefit from the social programme, the policy mix may appear unequal, even if the programme itself serves important public health objectives.

In the Indonesian context, historical experience suggests that fuel price increases have occasionally acted as catalysts for protest movements, especially when combined with broader political dissatisfaction. However, such protests rarely emerge solely because of one policy decision. They usually arise from an accumulation of grievances, including economic pressures, perceptions of corruption, and declining trust in political leadership.

Therefore, if fuel subsidies were reduced while MBG continued unchanged, the likelihood of social tension would depend less on the existence of the programme itself and more on how the government manages three interconnected issues: fiscal transparency, perceived fairness, and effective communication with the public. If citizens believe that government spending is accountable and that social programmes genuinely serve vulnerable groups, the risk of widespread conflict may remain limited. On the other hand, if economic hardship coincides with suspicions of mismanagement or unequal policy priorities, the combination could contribute to broader public dissatisfaction.

Ultimately, the policy challenge for the administration of Prabowo Subianto lies in balancing fiscal realism with social legitimacy. Rising oil prices can constrain the state budget, but the political consequences of fiscal adjustments depend largely on whether the public perceives government policies as fair, transparent, and oriented toward the collective welfare rather than particular interests.

World Crude Oil Price Analysis: Impact of the US–Israel vs Iran Conflict

At the Beginning of March 2026

The joint US–Israeli military campaign launched against Iran on 28 February 2026 has triggered the most severe energy market shock since Russia invaded Ukraine in 2022. Within ten days of hostilities commencing, Brent crude surpassed $100 per barrel for the first time in four years, driven by the effective closure of the Strait of Hormuz—the world's most critical oil chokepoint—and sustained attacks on energy infrastructure across the Gulf region. As of 9 March 2026, Brent crude stands at approximately $103–$104 per barrel, representing a 42 per cent increase since the conflict began, whilst WTI has risen to around $101 per barrel, some 50 per cent above pre-war levels. Shipping traffic through the Strait has declined by at least 80 per cent, and approximately 20 per cent of seaborne crude globally has been disrupted.

1. Chronology of the Conflict and Price Movement

The conflict was initiated by coordinated US and Israeli airstrikes on Iranian military and nuclear facilities on 28 February 2026. Iran responded with wide-ranging missile and drone attacks targeting Gulf energy infrastructure, military installations, and shipping lanes across the region.

Prior to the outbreak of hostilities in early February 2026, Brent crude was trading at approximately $73 per barrel, with WTI at around $69. The initial shock of the US and Israeli strikes on 28 February caused Brent to rise sharply to $79.40 — a gain of roughly 9 per cent — whilst WTI climbed to approximately $72, up 4 per cent, as traffic through the Strait of Hormuz ground to a halt. By 4 March, with regional escalation intensifying, Brent had reached $82.76 — a 16 per cent increase on pre-conflict levels — following Qatar's declaration of force majeure and the closure of Saudi Aramco's facilities. The most dramatic movement occurred between 7 and 8 March, when Israeli strikes on Iranian oil facilities pushed Brent into the $100–$119 range and WTI to between $101 and $110 per barrel — the first time either benchmark had breached $100 since the Ukraine war of 2022. As of 9 March, Brent has consolidated at approximately $103–$104 per barrel in what analysts have described as the largest single-day price jump ever recorded.

All price figures above are approximate intra-day values compiled from Al Jazeera, CNN, NPR, PBS, CNBC, and Reuters between 28 February and 9 March 2026.

2. The Strait of Hormuz: Global Energy's Critical Chokepoint

The Strait of Hormuz—a narrow maritime passage between Iran and Oman — represents the single most consequential corridor in global energy supply chains. Its near-closure following the outbreak of the US–Iran conflict constitutes an unprecedented operational disruption to world oil markets. 

2.1 Scale of Disruption

Approximately 15 to 17 million barrels of crude oil transit the Strait daily—roughly one fifth of all seaborne oil traded globally. Since hostilities commenced, shipping traffic through this corridor has fallen by at least 80 per cent, with commercial operators, major oil companies, and insurance underwriters having largely withdrawn from the passage. An Iranian Revolutionary Guard Corps (IRGC) commander has formally declared the Strait 'closed', issuing warnings that vessels attempting to transit would be 'set ablaze'. At least five tankers have been struck by Iranian forces, and approximately 150 ships remain stranded in the region unable to proceed.

The consequences for major producing nations have been severe. Saudi Arabia, the UAE, Iraq, and Kuwait have all been compelled to suspend shipments, with an estimated 140 million barrels effectively withheld from the market—equivalent to approximately 1.4 days of total global demand. 

2.2 Infrastructure Damage

Qatar has declared force majeure on its liquefied natural gas (LNG) exports following Iranian drone strikes on its facilities. This development has removed approximately 20 per cent of global LNG supply from the market, with recovery estimated to require at least one month. Saudi Aramco's Ras Tanura refinery and export terminal — one of the world's largest processing and export hubs — has been forced to suspend operations following strikes, though the full extent of the damage has not yet been confirmed. Across the broader Gulf region, refineries and LNG facilities in Bahrain, Kuwait, Qatar, Saudi Arabia, and the UAE have all sustained targeting, collectively taking approximately 9 million barrels per day of production capacity offline.

"The market is shifting from pricing pure geopolitical risk to grappling with tangible operational disruption, as refinery shutdowns and export constraints begin to impair crude processing and regional supply flows."—JP Morgan Analyst Assessment

3. Global Economic Repercussions

The oil price shock has propagated rapidly and broadly across international financial markets, with implications extending well beyond the immediate conflict zone. 

3.1 Equity Markets

Asian and European equity markets have sustained significant losses in response to the escalating crisis. Japan's Nikkei 225 has fallen more than 5 per cent, having shed up to 7 per cent at the market open. South Korea's KOSPI has declined 6 per cent, having earlier plunged by as much as 8 per cent intraday. In Europe, the FTSE 100 and DAX have fallen approximately 2 and 3 per cent, respectively. In the United States, S&P 500 futures have dropped 1.7 per cent, with Nasdaq futures declining 1.9 per cent. 

3.2 Consumer and Inflationary Impact

The knock-on effects for consumers have been immediate and substantial. The average US retail petrol price rose approximately 16 per cent in a single week, climbing from $2.98 to $3.45 per gallon, with analysts forecasting that the national average will breach $4.00 imminently. More broadly, elevated energy costs feed directly into transportation, manufacturing, and electricity expenditure, with inflationary pressure flowing through to food, fuel, and consumer goods prices on a global scale.

Former US Treasury Secretary Janet Yellen has warned publicly that the conflict risks suppressing US economic growth and exacerbating inflationary pressures, thereby complicating the Federal Reserve's path towards further interest rate reductions. This warning carries particular weight given that US inflation already stood at 2.4 per cent in January 2026, above the Fed's 2 per cent target, even before the current shock materialised. 

3.3 Impact on Asia

Asian economies face disproportionate exposure to this disruption. China, India, Japan, and South Korea collectively account for nearly 70 per cent of all crude shipments through the Strait of Hormuz, with China alone importing approximately 6 million barrels per day from the Gulf region. Goldman Sachs has modelled that a six-week closure of the Strait, with Brent at $85 per barrel, would raise headline inflation across the region by approximately 0.7 percentage points.

Indonesia and the Philippines face particular vulnerability. Central banks in both countries may be forced to pause or reverse their rate-cutting cycles in response to imported energy inflation. BMI (Fitch Solutions) estimates that the conflict will add between seven and 27 basis points to headline consumer price inflation across Asia, with the sharpest impact expected in Thailand, South Korea, and Singapore.

As a net oil importer, Indonesia faces a widening energy trade deficit and potential domestic inflation from rising global crude prices. The Indonesian government may face difficult choices between expanding fuel subsidies — which would strain the fiscal position — or permitting pump prices to rise, which would exert direct inflationary pressure on households.

4. Forward Scenarios and Price Projections

The trajectory of oil prices over coming weeks and months remains highly contingent upon the duration and intensity of the conflict, and crucially, upon whether and when the Strait of Hormuz can be reopened to commercial traffic. Analyst consensus, drawing on research from Goldman Sachs, Kpler, Rystad Energy, Bank of America, and JP Morgan as at 9 March 2026, points to four principal market scenarios.

In the event of a rapid resolution within two weeks — marked by the reopening of the Strait and a cessation of hostilities — Brent is projected to retreat towards the $80–$90 per barrel range, representing a moderate but meaningful correction from current levels. Should the disruption extend over a period of one to two months, with the Strait remaining effectively closed and strategic petroleum reserves being partially released by the IEA and G7, Brent is forecast to trade in the $100–$120 range, with correspondingly high macroeconomic impact. A scenario of prolonged conflict lasting more than two months — involving widespread infrastructure damage across the Gulf — could drive Brent to $120–$150 or above, with global recession risk becoming a central concern and emergency rationing likely in the most exposed Asian economies. In the most severe scenario — a full Hormuz blockade sustained over an extended period — Brent could breach $150 per barrel, representing an estimated shortfall of 600 million barrels per day with no precedent in modern energy history.

Qatar's Energy Minister, Saad al-Kaabi, warned the Financial Times on Friday that all regional producers could soon be compelled to halt production entirely, with Brent potentially reaching $150 per barrel. The chief economist of ExxonMobil similarly assessed that there are 'many more scenarios' in which the Strait 'remains effectively closed harder for longer' than scenarios in which normal transit resumes swiftly.

5. Policy and Mitigation Responses

5.1 Supply-Side Responses

On the supply side, the G7 finance ministers are expected to discuss a coordinated release of strategic petroleum reserves in conjunction with the International Energy Agency. Media reports of this potential intervention contributed to a partial retreat in oil prices from an intraday high of $119 to approximately $110 per barrel, illustrating the sensitivity of markets to policy signals. Eight OPEC+ member states announced a production boost at the outset of the conflict, though the constrained logistics environment — with the Strait remaining closed — significantly limits the near-term effectiveness of any such increase. The United States Strategic Petroleum Reserve (SPR) has not yet been mobilised. It is worth noting that US crude is predominantly light, sweet crude, which limits its direct substitutability for the heavier, sour grades typically processed by East and West Coast refineries. 

5.2 Asian Government Responses

Nomura economists anticipate that Asian governments will deploy fiscal policy as the primary instrument for consumer protection, including price controls, higher fuel subsidies, and reductions in import tariffs on crude and refined products. However, such measures risk exacerbating existing fiscal pressures across the region, presenting governments with a stark choice between accepting higher domestic inflation or widening their budget deficits. Neither option is without significant economic and political cost.

6. Conclusion

The US–Israel conflict with Iran represents the most significant geopolitical energy shock of the decade. The effective closure of the Strait of Hormuz — even if ultimately temporary — has demonstrated with stark clarity the extreme fragility of global energy supply chains and the catastrophic consequences of disruption concentrated at this single maritime chokepoint.

The central question for markets is not whether oil prices will remain elevated for the duration of hostilities — that much is now virtually certain — but rather the extent of permanent infrastructure damage incurred across the Gulf. Unlike a straightforward Hormuz blockade, which could in principle be unwound relatively quickly upon de-escalation, physical damage to refineries, export terminals, and pipeline networks could suppress regional production capacity for months or potentially years, sustaining elevated prices well beyond any formal cessation of conflict.

Markets, central banks, governments, and consumers alike must prepare for a prolonged period of energy market volatility, with significant second-order effects on inflation, monetary policy, and economic growth across the global economy. Brent crude is likely to remain above $100 per barrel for as long as the Strait of Hormuz remains effectively closed and Gulf infrastructure continues to sustain damage. A $150 per barrel scenario — whilst not constituting the base case — cannot be discounted if the conflict broadens or if critical Saudi and UAE export infrastructure is materially impaired. In the starkest terms, the global economy now faces its most severe energy supply shock since 1973.

DISCLAIMER: This briefing has been compiled from publicly available sources, including Al Jazeera, CNN, NPR, PBS, CNBC, Reuters, and Goldman Sachs research, as at 9 March 2026. It is intended for informational purposes only and does not constitute financial, investment, or legal advice. All price figures are approximate and subject to rapid change given the evolving nature of the conflict.

[Part 16]

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