The Iran-Israel conflict impact is becoming more apparent across Indonesia’s manufacturing sector. As geopolitical tensions escalate in the Middle East, particularly with the involvement of the United States and threats to the Strait of Hormuz, concerns over supply chain disruption and rising energy costs are spreading among local industry players.
Manufacturers in key sectors, including petrochemicals, furniture, and textiles, warn that rising oil prices and logistical instability could significantly affect production costs and the availability of raw materials. These pressures are prompting businesses to seek alternative sourcing and push the government for stronger protection against cheap imports.
Rising Oil Prices Drive Raw Material Costs
The sharp rise in global oil prices following the outbreak of the Iran-Israel conflict has become a pressing issue. Brent crude prices have jumped approximately 13%, while West Texas Intermediate has climbed around 10% since the conflict began on June 13, 2025. As of June 23, Brent was trading at US$71.48 per barrel, with WTI at US$68.51.
Goldman Sachs projects that Brent crude could spike to US$110 per barrel if oil flows through the Strait of Hormuz are halved for one month. This scenario alarms downstream industries.
“If [oil prices] quickly hit US$80–US$100, even just reaching US$80, all petrochemical prices will change,” said Fajar Budiono, Secretary General of the Indonesian Olefin, Aromatic, and Plastic Industry Association (Inaplas), as cited by Bisnis.com.
He noted that naphtha, a key imported raw material, is expected to rise by US$50 per ton, while polymer prices could increase by US$10–20 per ton.
Iran-Israel Conflict Impact Threatens Supply Chains
The Iran-Israel conflict impact also threatens to disrupt Indonesia’s raw material supply chains. Fajar revealed that roughly 80% of naphtha imports originate from the Middle East. While polymer imports account for only about 30%, any disruption could still spark shortages.
These cost increases are likely to ripple through industries producing plastic, packaging, and textiles. In response, manufacturers are turning to traditional markets to absorb excess inventory. Fajar added, “The traditional plastic packaging market has a 41% absorption potential.”
The furniture sector faces similar risks. Abdul Sobur, Chairman of the Indonesian Furniture and Handicraft Industry Association (HIMKI), stated, “This will impact global supply chains, including the procurement of raw materials and the distribution of Indonesian furniture and crafts overseas.”
He explained that many crucial inputs such as special adhesives, finishing materials, and metal components still come from abroad. Rising insurance premiums and shifting shipping routes will only exacerbate the problem.
Industry Braces for Import Disruption and Logistics Surge
In addition to oil, businesses are preparing for higher logistics costs and delayed deliveries. The Strait of Hormuz and the Red Sea remain vital shipping routes for Indonesia’s imported energy and industrial goods.
Sobur warned that, “Industry players have begun seeking local and regional [ASEAN] material alternatives to reduce dependency and cut production costs.” He estimates logistics and raw material costs could rise by 15–20% if the conflict spreads further.
Domestic Pressure and Import Influx Complicate Outlook
Rising imports of cheap products from China are compounding industry woes. Fajar revealed that one PET (polyethylene terephthalate) plant has already shut down. “This is becoming increasingly worrying,” he said.
Domestic manufacturers are also grappling with declining production utility, pushing them to urge the government to impose stricter import controls.
Strengthening Resilience Through Local Production
The Indonesian Young Entrepreneurs Association (Hipmi) is calling for a transformation of the national industry to build greater self-reliance.
“The Middle East conflict—especially threats to the Strait of Hormuz and the Red Sea—has disrupted global supply chain stability, including for Indonesia. Hipmi sees this as a strong signal to accelerate national supply chain resilience,” said Hipmi Secretary General Anggawira.
He stressed that sectors dependent on gas, metal, and petrochemicals are the most vulnerable. “There is already an increase in shipping insurance costs and uncertainty in delivery schedules,” he said.
Hipmi urges stronger development of upstream industries and diversified sourcing. “We are pushing for the diversification of raw material sources and strengthening of upstream industries to reduce reliance on imported semi-finished goods,” Anggawira noted.
Business Urged to Stay Alert Amid Geopolitical Uncertainty
Economists agree that the Iran-Israel conflict impact, while limited now, poses serious risks if it spreads. Mohammad Faisal, Executive Director of CORE, said, “For general raw materials, the current impact is not very significant.”
However, if the conflict extends to areas like Egypt or the Suez Canal, broader global disruptions could follow. “There could be a shift away from routes near the Middle East, particularly the Persian Gulf,” Faisal warned.
With oil prices already rising from US$60 to over US$75 per barrel, further instability may increase energy costs. Faisal concluded, “Gas and other substitutes may also see price increases, although not as sharply as crude oil.”
As uncertainty grows, industry leaders and policymakers must remain alert and adopt adaptive strategies to safeguard Indonesia’s manufacturing resilience.
Source: ekonomi.bisnis.com
Image: Getty Images
