Rising tensions between the United States and Iran pose a serious threat to Indonesia’s economic stability, said Syafruddin Karimi, an economist at Padang-based Andalas University. 

Karimi stressed that “geopolitical escalation following the U.S. strikes on Iran’s nuclear facilities could send shockwaves through emerging markets like Indonesia, particularly in the form of rupiah depreciation, rising inflation, and fiscal pressure due to energy subsidies.”

His statement came in the wake of President Donald Trump’s confirmation that the U.S. military had launched targeted strikes on Iran’s key nuclear sites − Fordow, Natanz, and Isfahan − calling the operation a “spectacular military success” and warning of further action if Iran refuses to pursue peace.

“ Global markets reacted sharply to the developments. Crude oil prices surged, investor appetite for safe-haven assets like gold and the U.S. dollar spiked, and stock markets across Asia experienced sharp sell-offs. Analysts warn that if Iran retaliates by closing the Strait of Hormuz, oil prices could soar to US$130 per barrel. This scenario, modeled by Oxford Economics, could push U.S. inflation to 6 percent and halt any potential rate cuts by the Federal Reserve this year,” Karimi said as quoted in a statement on Monday, June 23, 2025.

He said further that such a development would likely trigger capital outflows from emerging markets, including Indonesia, placing downward pressure on the rupiah. A weaker currency, he added, could inflate the cost of imported goods and burden Indonesia’s fiscal position, especially as fuel subsidies increase in tandem with global oil prices.

“The government must act decisively and swiftly,” Karimi emphasized. “The Indonesian Central Bank (Bank Indonesia) and the Ministry of Finance need to coordinate in safeguarding foreign exchange reserves, managing energy supply chains, and providing credible communication to avoid panic in financial markets.” he noted.

As the global economic outlook becomes increasingly uncertain, economists ask Indonesia to adopt a proactive stance. Beyond macroeconomic stabilization, strategic energy planning and geopolitical risk mitigation are expected to be critical for preserving Indonesia’s long-term economic resilience.

This crisis, Karimi concluded, “is a stark reminder that foreign conflicts have direct domestic implications. The time to respond is now − before the economic fallout becomes unmanageable.”

On June 21, 2024, the United States launched a coordinated military strike targeting Iran’s key nuclear facilities − Fordow, Natanz, and Isfahan. These sites have long been central to Iran’s controversial uranium enrichment program. According to U.S. President Donald Trump, the strike was intended to “neutralize imminent threats” and pressure Tehran into halting its nuclear ambitions.

The attack marks a significant escalation in U.S.-Iran tensions, following months of failed diplomatic engagement and a series of proxy confrontations in the Middle East. While the White House claimed the operation was precise and successful in disabling critical infrastructure, Iran has denounced it as an act of war, vowing retaliation.

The targeted facilities are among Iran's most fortified and strategically important. Natanz, located in central Iran, houses advanced centrifuges, while Fordow is built deep underground to resist airstrikes. The Isfahan site is a key processing center for uranium conversion.

The international community has expressed concern over the potential for broader regional destabilization. Analysts warn that Iran’s possible retaliation, particularly the closure of the Strait of Hormuz − a key global oil transit route − could disrupt global energy markets and exacerbate geopolitical volatility.