Brace for Oil Shock: How a Strait of Hormuz Closure Could Affect Indonesia’s Economy and Tourism — and How We Can Stay Resilient

In today’s interconnected global economy, distant geopolitical tensions can reach our shores in an instant. One scenario that deserves our serious attention is the potential closure — even temporarily — of the Strait of Hormuz, the world’s most strategic oil shipping route.

Roughly 20% of the world’s oil supply and a significant share of global LNG exports pass through this narrow channel between Iran and the Arabian Peninsula. A disruption would push oil prices sharply higher — with credible forecasts placing Brent crude above $120–150 per barrel if the strait were fully blocked.

Indonesia, like many energy-importing nations, would not be immune. But we must remember: we are no stranger to external shocks. Over the years, Indonesia has proven remarkably resilient in navigating global crises, from the Asian Financial Crisis to the oil price surges of the 2000s, and more recently the COVID-19 pandemic.

Navigating Higher Costs and Inflation

A sudden oil shock would immediately push up fuel import bills and put downward pressure on the rupiah. As a nation that subsidizes retail fuel to maintain social stability, we would face a familiar dilemma: either increase subsidy spending — putting pressure on the budget — or allow domestic prices to rise, adding to inflation and public frustration.

Higher fuel prices would ripple through transportation, logistics, and production costs, raising the prices of goods and services for all Indonesians. Bank Indonesia may need to tighten monetary policy faster to tame inflation, which could slow consumption and investment growth.

Yet, our macroeconomic fundamentals remain sound: healthy foreign exchange reserves, a broad-based economy, and solid fiscal reform frameworks all provide a buffer to absorb external turbulence.

Ensuring Energy Security

Energy security would become an urgent priority. Many outer islands still rely on diesel generators (PLTD) for electricity. Soaring diesel costs would stress PLN’s generation costs and could lead to supply constraints if not managed well.

Indonesia’s strong biofuel policies — from B35 to the planned B40 and B50 — are a testament to our commitment to reduce reliance on imported fossil fuels. Likewise, our expanding renewable energy sector and growing electric vehicle ecosystem are practical steps that build resilience against global oil shocks.

Tourism Sector: Challenges and Adaptive Strength

Our tourism industry, which creates millions of jobs and supports rural economies, would feel the immediate effects of higher oil prices:

• Airfares would rise, discouraging both inbound and domestic travel.
• Hotels, resorts, and tour operators would face higher logistics and utility costs, squeezing margins.
• Domestic inflation would lower discretionary income, potentially dampening spending on leisure and travel experiences.
• Major source markets such as China, Japan, Australia, and India may also see slower growth and less outbound tourism.

Yet Indonesia’s tourism sector has repeatedly shown its adaptive strength: during the pandemic, when international arrivals fell to near zero, domestic travel sustained many local destinations. Today, with improved connectivity, digital marketing, and new attractions, we are better positioned to tap the vast domestic and ASEAN regional market, which can partially offset any shortfall in long-haul visitors.

Investing in Resilience and Turning Crisis Into Momentum

Indonesia’s resilience is not just a slogan — it is a proven fact, built on decades of overcoming adversity with pragmatic policy, public-private collaboration, and community solidarity.

In this scenario, our priorities should be clear:

• Protect the vulnerable with well-targeted fuel subsidy measures and direct assistance if prices must rise.
• Safeguard macro stability by ensuring sufficient foreign exchange buffers and prudent monetary policy.
• Boost domestic energy production and accelerate the biofuel blend roadmap, to reduce dependency on volatile imports.
• Expand strategic reserves and regional fuel distribution to guarantee continuity of supply in all regions.
• Support the tourism sector with incentives, smart collaborations with airlines, affordable packages, and marketing that highlights Indonesia as an accessible, nearby destination for regional travelers.
• Double down on sustainability, from EVs to renewables to energy-efficient hotels, so we are less exposed to oil price volatility in the future.

A Call to Stay United and Forward-Looking

Global oil market disruptions remind us that resilience is not just about surviving the storm, but about strengthening our foundations to thrive after it passes. Indonesia’s geographic advantage, resource wealth, growing middle class, and innovative spirit are enduring strengths.

If the Strait of Hormuz ever closes, Indonesia will feel the shock — but we will also demonstrate, once again, that we can adapt, protect our people, and emerge stronger.