Depok. Indonesia could face higher energy costs, inflation and debt-servicing pressure if the Middle East conflict persists, economist Ahamed Kameel Meera warned, as rising oil prices threaten to ripple through the broader economy.

As a net energy importer, Indonesia would be particularly exposed to higher oil prices, which could raise costs across industries and push up fertilizer and food prices, said Ahamed, co-founder and vice president of Waqafa International, at the 5th International Conference on Muslim World Economy and Business in Depok on Tuesday.

Brent crude climbed to around $108 per barrel as of Tuesday, while Indonesia’s Crude Price (ICP) rose to $89.43 per barrel in August from $81.68 in July, underscoring the growing energy-cost pressure facing oil-importing economies.

“For net importers, there will be higher energy costs. Because oil is an input into almost all economic sectors, the main issue for importers is serious inflation,” Ahamed said.

He said the shock could extend beyond consumer prices. Higher inflation could prompt central banks to raise interest rates, increasing borrowing costs, while currency depreciation would make external debt more expensive to service.

“If inflation goes up, central banks try to increase interest rates to curb inflation. Currency also depreciates when inflation goes up, thereby increasing debt service on external loans. This will put fiscal stress on the government,” he said.

Ahamed described the potential chain reaction as higher energy costs leading to inflation, weaker exports, currency depreciation, higher external debt burdens, fiscal pressure, lower investment, slower economic growth and, ultimately, weaker employment.

The vulnerability stems in part from the Middle East’s importance to global energy supplies. According to Australian National University (ANU) economist Anas Iqtait, Middle Eastern countries hold around half of the world’s proven oil reserves and more than 40% of its natural gas reserves. Around 30% of global daily hydrocarbon production also comes from the region, with roughly two-thirds of that output exported internationally. That makes prolonged disruption in the region a broader global economic risk, particularly for countries that depend heavily on imported energy.

However, Anas said Indonesia is relatively better positioned to absorb the shock than some other economies in the Organization of Islamic Cooperation (OIC).

Anas assessed countries based on both their exposure to the conflict and their capacity to absorb economic shocks, including immediate liquidity and longer-term financial resilience. Exposure includes factors such as reliance on fuel imports, remittance flows from Gulf countries and the impact of international price increases.

“I would certainly expect a country like Egypt or Pakistan to fall into economic difficulty because of the ongoing conflict in the Middle East before a country like Singapore or Thailand or Indonesia or Turkey does,” Anas said.

Indonesia therefore faces risks from the conflict but has greater room to absorb the initial shock than some more vulnerable OIC economies, he said.

The difference is important because the economic impact of the conflict is unlikely to be uniform across Muslim-majority economies. While oil-producing countries can benefit from higher energy prices, net importers face the opposite effect as fuel becomes more expensive and feeds into production, transport and food costs.

Ahamed also warned that higher energy prices could raise fertilizer costs because petrochemicals are a key input in fertilizer production. This could add another layer of pressure on food prices in import-dependent economies.

The conflict has also highlighted the broader challenge of economic resilience among OIC countries, Anas said. High external income from natural resources, remittances, tourism and aid does not necessarily translate into deeper manufacturing capacity, technological capability or more sophisticated exports.

For Indonesia, the immediate challenge is therefore not only containing the direct impact of higher energy prices but also strengthening its ability to withstand external shocks, particularly through greater productive capacity and reduced dependence on critical imports.

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