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US-Iran row exposes another threat to the Indonesian economy
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Iranian mourners gather around a vehicle carrying the coffin of slain top general Qasem Soleimani during the final stage of funeral processions, in his hometown Kerman on January 7, 2020. (AFP/Atta Kenare)
T
he heightened tension between the United States and Iran after a US air strike killed influential Iranian general Qasem Soleimani last week will add to the global economic uncertainties, which could further affect Indonesia’s exports, analysts have said.
BNI Sekuritas head of research Damhuri Nasution said the escalation of the tension between the US and Iran could potentially affect Indonesia’s economy as a result of rising oil prices and foreign outflows.
“About 30 percent of the world’s oil supply goes through the Hormuz Strait in Iran,” he explained during a discussion on the market outlook in Jakarta on Monday. “If the tension further escalates between the two countries and Iran decides to close off the strait, it will hinder the global oil supply and catapult oil prices this year.”
Should the row between the world’s top oil producers heighten, he predicted oil prices would increase to above US$100 per barrel.
The situation worsened on Tuesday as Iran launched more than a dozen missiles at two Iraqi bases that hold US troops in what appears to be retaliation for the airstrike last week, the Pentagon said Tuesday as reported by CNN.
Oil prices jumped following the Iran attacks, sparking fears the deepening conflict would disrupt global crude supplies. Crude oil prices in London briefly surged more than 5 percent to almost $72 a barrel early on Wednesday as the Islamic Revolutionary Guard Corps claimed responsibility for the missile strikes, Bloomberg reported.
Asian shares and US treasury yields plunged, while gold and oil shot higher. MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.5 percent. Japan’s Nikkei dropped 2.5 percent and Australian shares fell 1 percent.
