Strait of Hormuz blockade exposes Indonesia’s energy vulnerabilities

The closure of the Strait of Hormuz amid the escalating Middle East war has disrupted global oil and gas shipments, driving up prices and exposing Indonesia to serious energy and financial risks. Around 25 percent of the country's oil imports originate from the Middle East and pass through the strait, while domestic fuel reserves can only last for around 20 days. With oil prices recently surpassing US$100 per barrel and the rupiah weakening to around Rp 17,000 per United States dollar, Indonesia now faces an additional layer of economic and energy security risk. The administration of President Prabowo Subianto is therefore under pressure to secure alternative supplies and stabilize domestic markets.

The Energy and Mineral Resources Ministry revealed that the current fuel stockpile provides a consumption buffer of only between 20 and 25 days, far below the 90-day net import reserve recommended for members of the International Energy Agency (IEA). Official data show that domestic fuel consumption totaled 82.9 million kiloliters (kL) in 2024, or roughly 227,136 kL per day. The ministry has noted that existing reserves are mainly intended to meet daily operational needs, while limited storage capacity constrains the country’s ability to maintain strategic petroleum reserves. According to the National Energy Council (DEN), state-owned oil and gas holding company Pertamina holds the majority of national energy reserves.

Several key fuel products have a buffer period of less than a month. Liquefied petroleum gas (LPG) has only 15 days of reserves, while most diesel products have around an 18-day buffer period. The subsidized high-octane gasoline product Pertalite, which is rated research octane number (RON) 90, has a buffer period of 19 days, RON 92 gasoline 26 days and both RON 98 gasoline and jet fuel around 29 days. Other fuels have slightly longer buffer periods: marine fuel oil (33 days), kerosene (38 days) and cetane number (CN) 53 diesel fuel (39 days).

The Strait of Hormuz remains one of the world’s most critical energy choke points. In 2024, around 20.3 million barrels per day (mbpd) of oil passed through the strait, or nearly one-fifth of global oil consumption of around 102.7 mbpd, according to the US Energy Information Administration. LNG shipments through the strait reached approximately 291.49 million cubic meters. At its narrowest point, the waterway is only around 33 kilometers wide, making it particularly vulnerable to disruption during a regional conflict.

Public awareness of the potential disruption to fuel supplies, combined with official acknowledgement of limited national reserves, has triggered panic buying in several regions. This has worsened fuel supply disruptions that have been affecting Aceh, North Sumatra and Riau since early March. The demand surge has added further strain to supply chains, particularly as fuel consumption typically rises ahead of Idul Fitri. Pertamina had previously projected gasoline demand during the holiday season to increase around 12 percent compared with normal levels.

To mitigate supply risks, the government has begun redirecting some oil and gas imports, previously sourced from Middle Eastern countries and accounting for roughly 25 percent of overall fuel imports, to US suppliers. The energy ministry noted that RON 90, 92, 95 and 98 gasoline are already being sourced mainly from Southeast Asian suppliers rather than the Gulf region. At the same time, the government aims to gradually expand the energy buffer to 90 days. However, importing oil and gas from the US could increase logistics costs up to 30 percent compared with importing from Middle East.

Middle East suppliers contribute around 30 percent to Indonesia’s LPG imports, while US suppliers provide the remaining 70 percent. The government is therefore preparing a contingency plan to diversify LPG import sources to reduce geopolitical risk. The energy ministry has pledged to keep subsidized fuel prices stable until Idul Fitri, although prices for nonsubsidized fuels have been allowed to follow market dynamics since 2022. The government is meanwhile exploring ways to improve the efficiency of the free nutritious meal program but has rejected calls for broader budget cuts.

Looking ahead, the government could find a way to develop bigger oil storage facilities, such as by instructing state asset fund Danantara to review and strengthen the Energy Buffer Reserves program, mandated by Presidential Regulation No. 96/2024, as a foundation for building strategic petroleum reserves. In the longer term, the country must accelerate its energy transition. The rising fiscal burden of oil and gas subsidies, exacerbated by supply shocks such as the emerging energy crisis, could instead be redirected to support electric vehicle adoption, including electric motorcycles, as well as to expand public transportation services nationwide.

The US-Israeli war with Iran has caused oil prices to surge. On March 9, 2026, both the Brent and West Texas Intermediate (WTI) crude oil futures briefly jumped to $119.5 and $119.48 per barrel, respectively, after several Arab Gulf states reduced oil and gas production. Prices later eased slightly but remained elevated after US President Donald Trump vowed to seize control of the Strait of Hormuz. Brent crude futures eventually closed down 4.6 percent at $88.43 per barrel, while WTI settled 6.19 percent lower at $85.27.

Rising oil prices present a direct fiscal risk for Indonesia. The 2026 state budget assumes an average crude oil price of $70 per barrel. State-owned Bank Mandiri estimates that every $1 increase in crude prices will add approximately Rp 10.3 trillion ($608 million) in energy subsidies and compensation costs, while added tax and royalty revenues will reach only around Rp 3.5 trillion. Inflationary pressure would also rise: Every 10 percent increase in Pertalite price could push up inflation by 0.27 percentage points, while a similar price increase for subsidized diesel product Solar would raise inflation by around 0.05 percentage points.