The government is preparing a host of measures to buoy the tourism industry as the economic fallout from the Middle East crisis begins impacting air travel via rising fuel costs.

The government is taking a cautious policy approach as INACA presses the urgent need to adjust the airfare cap to reflect a jump in avtur prices of over 70 percent as a result of the Middle East crisis.

Oil prices spiked and stocks sank on Thursday after Donald Trump reiterated that US forces would hammer Iran for another two to three weeks but offered no solution to the closure of the Strait of Hormuz that has crippled global markets.

Initially, the government budgeted Rp 381.3 trillion (US$22.5 billion) ​to pay for energy subsidies and also compensate state energy firm Pertamina and utility ​company PLN for their efforts to keep some fuel prices and electricity tariffs at an affordable level.

Inflation in Indonesia has slowed down in March despite surging global oil prices and elevated demand over the Idul Fitri holidays, but analysts warn of rising inflationary pressure as the Iran war drags on.

Experts noted that similar maximum interest rate rules exist in other countries, but argued that Indonesia’s implementation needs improvement.  

Precious metals and jewelry recorded the highest annual import growth, followed by mechanical appliances and electrical machinery.

A monthly survey by S&P Global published on Wednesday showed Indonesia’s headline Purchasing Manager’s Index (PMI) slid from 53.8 in February to 50.1 last month.  

The two countries were also expected to advance defense ties, as well as strengthen cooperation in new growth areas such as artificial intelligence and nuclear power.

The government estimates the measures, which enter into force Wednesday and are to be reviewed every two months, would save between Rp 121 trillion and Rp 130 trillion ($7.1-7.6 billion).

Asian stock markets including Jakarta rallied Wednesday after US President Donald Trump said the Middle East war would be over in up to three weeks and his Iranian counterpart said Tehran had "the necessary will" to bring it to an end.

The government will not hike fuel prices heading into the new month despite growing pressure on the state budget because of a rapid rise in global oil prices as nations scramble for crude oil amid the United States-Israeli war on Iran.

Euro zone inflation soared past the European Central Bank's 2 percent target this month as surging oil and gas costs drove up headline prices, but the jump was smaller than expected and core inflation declined, muddying the picture for policymakers.

The business agreement covers the energy sector with Japan’s INPEX, as well as technology, finance, fertilizer and tourism.

The 100 GW solar target, which the government plans to deploy through the nationwide Red and White Cooperatives (KMP) program, would require massive investment in photovoltaic farms, storage systems and transmission infrastructure. 

While Indonesia faced a similar situation in 2022, the ongoing Iran war represents a different dynamic that will require critical policies that balance fiscal stability and purchasing power toward maintaining resilience.

The dollar headed for its biggest monthly gain since July on Tuesday and stands out as the strongest so-called safe asset as war in the Middle East has set oil prices surging, nearly everything else sinking and raised the risk of global recession.

Indonesia summoned officials from Meta and Google over non-compliance with social media restrictions for children under 16 that went into full effect last week, a minister said in a video statement published on Tuesday.

Shifting from fuels to electricity for powering households and transportation is a logical response to Indonesia’s dependence on energy imports amid the Mideast crisis, but experts say the success of electrification hinges on sustained policy support.

Previously, the government revealed plans to cut national production targets from 790 million tonnes last year to around 600 million tonnes this year in an effort to address an oversupply that had weakened coal prices.

With the dry season forecast to arrive early and last longer due to a potential shift to El Niño, the government is readying several agricultural measures, including AWD to maintain optimal rice production.

Japan stepped up yen intervention threats and signaled that further falls in the currency could justify a near-term interest rate, as policymakers grow increasingly concerned about inflationary pressures from the Middle East war.

World Trade Organization talks ended deadlocked on Monday as Brazil blocked a bid by the United States and other countries to secure an extension to a moratorium on customs duties for electronic transmissions like digital downloads, diplomats said.

While some Asian nations have declared energy emergencies amid the US-Israeli war on Iran, Indonesia has stopped short of following suit, stressing that domestic fuel and liquefied petroleum gas (LPG) supplies are secure.

The Indonesian Fintech Association (AFPI) has expressed disappointment over the ruling, saying that the maximum economic benefit set by its members was determined under a directive from the Financial Services Authority (OJK).

Countries are working to close the gap between the US and India to extend a global agreement not to impose tariffs on electronic transmissions such as digital downloads and streaming, diplomats said on Saturday.

The ambassador facilitating talks on reforming the World Trade Organization has voiced cautious optimism on progress at a high-level meeting in the Cameroonian capital, where reforming the beleaguered global trade body is at the heart of a four-day ministerial conference.