The escalation of the Iran war has materially increased downside risks to Indonesia’s macro-fiscal outlook by driving oil prices higher, weakening the rupiah, and raising the likelihood of larger energy subsidy, compensation, and imported inflation pressures. Based on the RAPBN 2026 sensitivities, every USD1/bbl increase in oil prices would widen the fiscal deficit by around IDR6.8 trillion, every IDR100 depreciation in the rupiah would add roughly IDR0.8 trillion to the deficit, and every 0.1 percentage point rise in the 10-year SBN yield would increase interest spending by approximately IDR1.9 trillion. The government’s own stress scenario presented on 13 March 2026 suggests that APBN 2026 could breach the statutory 3% of GDP deficit ceiling if the rupiah weakens to around IDR17,000 per US dollar and ICP averages above USD85/bbl, a scenario that now appears increasingly plausible as Brent has climbed above USD100/bbl and the rupiah has already approached that stress range. Although President Prabowo and Coordinating Minister Airlangga Hartarto have reaffirmed their commitment to keeping the deficit within 3% of GDP while maintaining the MBG program, doing so would require significant expenditure rationalization in other parts of the budget. Based on the government’s scenarios, the required efficiency measures could reach around IDR46.29 trillion under the optimistic case, IDR136.29 trillion under the moderate case, and IDR272.57 trillion under the pessimistic case, implying that a sustained oil price shock could sharply erode the subsidy budget and intensify the trade-off between fiscal discipline and social protection.