Surabaya — The escalating conflict between the United States–Israel and Iran, which has spread across the Middle East, is seen as potentially exerting serious pressure on East Java’s economy.

Chairman of the East Java Chapter of the Indonesian Chamber of Commerce and Industry (Kadin), Adik Dwi Putranto, warned that the impact of the global geopolitical conflict could spill over through rising energy prices, exchange rate volatility, and surging international logistics costs.

Adik stressed that as one of Indonesia’s key economic engines, East Java must respond swiftly and in a measured manner to these global dynamics to prevent disruption to regional economic stability.

“The main impact of the Middle East conflict on East Java will come from at least two channels: direct trade relations with the region and the ripple effects of rising global oil prices and disruptions to the international trading system,” Adik said in Surabaya on Tuesday (March 3, 2026).

He explained that around 20 percent of the world’s oil supply passes through the Strait of Hormuz, a region highly sensitive to conflict. Rising tensions could drive up crude oil prices and international shipping insurance premiums, ultimately affecting transportation and distribution costs, including shipments to Indonesia.

According to Adik, the most immediate pressure is likely to be felt in import-based food sectors, particularly soybeans. Indonesia still imports around 2.5–3 million tons of soybeans annually, with imports from the United States valued at more than US$1 billion.

East Java, as the national hub for tempeh and tofu production, is highly dependent on this supply. Higher oil prices and shipping costs are expected to increase the landed cost of soybeans. The risk would be compounded if accompanied by rupiah depreciation due to global risk-off sentiment.

“Tempeh and tofu MSMEs operate on very thin margins. If soybean prices surge, the remaining options would be raising retail prices, reducing product size, or even temporarily halting production,” Adik said.

Beyond food production, soybeans are also a key raw material for animal feed through soybean meal. Rising feed prices could spill over into higher chicken and egg prices, potentially driving regional food inflation.

Energy Costs Threaten Export Competitiveness

Meanwhile, from a foreign trade perspective, Vice Chairman for International Trade and Overseas Promotion at East Java Kadin, Tommy Kaihatu, noted that East Java’s export performance remains relatively solid.

“East Java’s export value stands at around US$30 billion, with a trade surplus of more than US$800 million, and approximately 10 percent of exports are directly destined for the Middle East,” Tommy said.

However, he cautioned that East Java’s export structure—dominated by manufactured goods, agro-industry, and processed industrial products—is highly sensitive to rising energy and logistics costs.

“The escalation of conflict could increase production costs for energy-intensive industries, container shipping rates, and export insurance premiums. If export contracts are fixed-price, exporters’ margins could be squeezed. At the same time, global uncertainty may dampen demand in destination markets,” he explained.

According to Tommy, the main challenge ahead is not merely a potential decline in export volume, but rather a loss of competitiveness due to higher production costs and exchange rate volatility.

To anticipate these risks, he proposed several strategic measures. In the short term (0–30 days), rapid coordination between local governments, importers, and industry players is needed to ensure soybean buffer stocks sufficient for at least one to two months of demand.

“Transparency in stock and distribution data through producer cooperatives is essential to prevent price speculation. In the industrial and export sectors, short-term working capital financing for food MSMEs, as well as support for exchange rate risk management and freight surcharge mitigation for exporters, must be strengthened,” Tommy said.

In the medium term (one to six months), Adik added that diversification of soybean import sources must be accelerated to reduce dependence on a single country of origin. At the same time, industrial energy efficiency and export market diversification toward non-conflict regions should become joint strategic priorities.

Despite rising global challenges, Adik emphasized that East Java’s economic fundamentals remain relatively strong and have proven resilient through previous global shocks. Nevertheless, swift response and cross-sector coordination remain key to preventing external pressures from escalating into serious disruptions to regional economic stability.

“We cannot control global geopolitics, but we can strengthen our regional economic resilience. Food stability and export competitiveness must become our shared priorities,” Adik concluded.