Indonesia Macro Update - The Ripple From Hormuz
KBVS MACRO UPDATE
Wednesday, 1 July 2026
The Ripple From Hormuz
The US-Israel and Iran conflict and the temporary closure of the Strait of Hormuz triggered the largest oil supply disruption in modern history. The global crude flows through the strait collapsed from around 20 mb/d to only a few million barrels per day, driving Brent crude price spiked from approximately USD60/bbl in early 2026 to a peak of USD118/bbl in Apr ‘26, before easing following the US-Iran Memorandum of Understanding (MoU), which opened the path to de-escalation.
For Indonesia, the shock was transmitted primarily through fiscal, inflationary, and financial market channels. Oil prices far exceeded the APBN assumption of USD70/bbl, significantly increasing energy subsidy requirements, while imported inflation pushed headline CPI close to the upper bound of Bank Indonesia's target range.
Although the ceasefire and ongoing negotiations have materially improved the near-term outlook, the normalization of global energy supply chains remains incomplete. Our baseline scenario assumes that oil prices will continue to ease gradually through the remainder of 2H26F as Gulf production and shipping recover. Overall, we expect Indonesia's macroeconomic outlook to gradually improve during 2H26F, although the pace of normalization will ultimately depend on the durability of geopolitical de-escalation and the uninterrupted flow of energy exports through the Strait of Hormuz.
Regards,
Khairunnisa N Syahfiraputri & Adolf R B Setiadi - KBVS Research Team