Airlangga: Iran-Israel Conflict Triggers Oil Price Surge

REPUBLIKA.CO.ID, JAKARTA — Coordinating Minister for Economic Affairs Airlangga Hartarto said that world oil prices experienced a spike as a result of Israel’s attack on the Iranian Embassy in Damascus and Iran’s retaliation.

He emphasized that from an economic perspective, the existence of the Red Sea and the Strait of Hormuz is important because it is the main route for 27 thousand oil ships in the Red Sea and 33 thousand oil ships in the Strait of Hormuz.

“And improvement freight costs “(shipping costs) are one thing that must be mitigated,” said Airlangga at the Presidential Palace Complex, Jakarta, after attending a limited meeting with the President regarding the Iran-Israel conflict, Tuesday (16/4/2024).

According to Airlangga, the escalation of tensions in the Middle East has increased global uncertainty. Apart from that, he also emphasized the need for mitigation regarding the transfer of assets to safe heavenas well as increases in the price of gold, nickel and the value of the US dollar.

“From a financial market perspective, the dollar index strengthened amid strong US economic releases,” said Airlangga.

Apart from that, the exchange rate and IHSG experienced weakening globally. But Indonesia is compared peer countries considered relatively safe.

Fundamentally, said Airlangga, the Indonesian economy grew solidly at 5 percent, with inflation of 2.5 plus or minus 1 percent. Meanwhile, the trade balance experienced a surplus and foreign exchange reserves were still around 136 billion US dollars.

He continued, the government will implement several policies, including fiscal and monetary mix, maintaining exchange rate stability, maintaining the APBN, and monitoring increases in logistics and oil prices.

Airlangga said, in the real sector, the impact of exchange rate depreciation and increases is one of the things to pay attention to because it has a big influence on imports and the effect of exporters getting more foreign exchange.

Therefore, in response to current world conditions, the government will continue to maintain structural reforms and investor expectations, strengthen competitiveness, and also attract long-term investment to Indonesia.

“Of course, various scenarios will be discussed later, of course to ensure that the deficit is within the range permitted by law,” he continued.

The government, said Airlangga, emphasized that all parties could exercise restraint in reducing tensions in the Middle East. Meanwhile, Minister of Foreign Affairs Retno Marsudi also conveyed President Jokowi’s message for Indonesia to continue making diplomatic efforts to ensure that relevant parties exercise restraint and avoid escalating tensions.

“So now each party has started to calculate if an escalation occurs, what impact it will have on each country. Both oil prices, prices of other necessities, and the dollar exchange rate, etc.,” said Foreign Minister Retno.