Iran-Israel War: A New Crisis Shaking the World's Geoeconomics and Geopolitics - Center for Geopolitic and Geostrategic Studies

The open war between Israel and Iran, which erupted on June 13, 2025, marks a dramatic turning point in the dynamics of the Middle East conflict.
Israel’s airstrikes against Iran’s strategic nuclear facilities in Natanz and Isfahan under the “Operation Rising Lion”, followed by Iran’s retaliatory strikes through “True Promise III Operation” targeting Israel’s military command centres, signify the escalation of a conflict that had previously remained in the shadows.

This battle quickly turned into more than just a clash between two countries: it has become a regional crisis raising global concerns about the outbreak of a major war in a sensitive region, which is a focal point for the interests of global powers.
This conflict is not an isolated incident, but rather the culmination of a series of historical, ideological, and geopolitical hostilities that have lasted for decades.
Israel and Iran have been involved in a “shadow war” across various fronts, including intelligence operations, airstrikes in Syria and Lebanon, and support for proxy groups.

The impact of this war extends to the global geoeconomic realm.
The surge in global oil prices, triggered by the potential disruption of the Strait of Hormuz, which handles more than 30% of the world’s oil supply, threatens the post-pandemic economic recovery.
Energy-importing countries like China, India, and the European Union are now facing new inflationary pressures and supply uncertainties.

On the other hand, this crisis also deepens global geopolitical polarization:
The United States clearly supports Israel, while Russia and China take a more balanced position, calling for dialogue and criticizing unilateral actions.
This shows that the conflict has the potential to strengthen great power rivalries in a multipolar international structure.

For Indonesia, this conflict poses both geopolitical challenges and opportunities.
As a net energy importer, the surge in oil prices could burden the state budget (APBN) and lead to domestic inflation.
However, Indonesia also has a strategic position as a regional power and a partner in global Islamic diplomacy.
With its commitment to the principle of “independent and active” foreign policy and support for peaceful resolutions, Indonesia can play an important role in multilateral forums such as the OIC (Organization of Islamic Cooperation) and NAM (Non-Aligned Movement) to push for de-escalation.

At the same time, this crisis serves as a reminder of the importance of strengthening national energy resilience and crisis diplomacy capacity to face the growing geopolitical uncertainty.

Polarization of Global Geopolitical Blocs

The open war between Iran and Israel is not only an armed regional conflict but also clarifies the emergence of new geopolitical blocs in the increasingly multipolar international system.

The strong support of the United States for Israel highlights the consistency of the strategic alliance that has been built over decades.
In contrast, Iran gains sympathy and indirect support from two other global powers: Russia and China.
Both countries have condemned Israel’s attack and emphasized the importance of a peaceful resolution based on the principle of national sovereignty.

China, highly dependent on energy supplies from the Gulf region, plays the role of a balancing power and has proposed the formation of a new peace forum.
Russia, on the other hand, still involved in a prolonged conflict in Ukraine, views this war as a strategic opportunity to expand its influence in the Middle East, particularly among countries opposed to Western dominance.

Thus, this conflict underscores the intensification of great power competition, where each regional crisis becomes a platform for projecting global interests and power.
The Iran-Israel war not only sparks a race for rhetoric and alliances but also impacts the dynamics of interstate relations in various international forums.

The United States strives to rally support from Western countries, while Russia and China use diplomatic instruments to build counter-blocs based on multipolarism and sovereignty principles.
This polarization echoes the global tension patterns of the Cold War, but in a more complex form within the context of economic globalization.

In Asia, this geopolitical shift raises new strategic considerations.
Countries in the region such as India, Indonesia, and ASEAN must navigate an increasingly fragmented diplomatic landscape.
As the pressure to take sides grows, countries adhering to non-alignment principles face a dilemma: remain neutral or take a tactical position for national interest.

For Indonesia, these developments require adaptive and principled diplomacy.
As a country with an independent foreign policy, Indonesia has room to act as a bridge for dialogue between blocs through active roles in multilateral forums such as NAM, OIC, and ASEAN.

This geopolitical polarization presented by the Iran-Israel war offers Indonesia the opportunity to reaffirm its position as a moral force on the international stage—advocating peaceful conflict resolution based on justice, respecting sovereignty, and avoiding the use of force as the primary foreign policy instrument.

Indonesia’s Strategic Interests

The open war between Iran and Israel also has serious implications for Indonesia’s foreign policy and national interests.
As the world’s largest Muslim-majority country and a key power in Southeast Asia, Indonesia cannot be indifferent to this conflict.

Indonesia’s foreign policy, based on the principle of free and active foreign policy, demands a firm yet balanced diplomatic response.
At the same time, Indonesia has historically been consistent in supporting the Palestinian struggle and opposing Israeli occupation.

On the other hand, Indonesia must maintain strategic relations with Iran, the Gulf states, and the United States for the sake of economic, energy, and regional security interests.

The economic impact of this conflict is being felt—directly—on Indonesia’s fiscal structure.
The surge in global oil prices, surpassing USD 120 per barrel, increases pressure on Indonesia’s State Budget (APBN), especially through rising energy subsidy costs.

As a net oil importer, Indonesia faces the risk of a widening fiscal deficit if energy prices are not controlled.
Sectors such as logistics, transportation, and manufacturing will experience increased production costs, potentially eroding competitiveness and leading to inflationary effects on the prices of consumer goods.

Nevertheless, this crisis also opens strategic opportunities for Indonesia to play an active role in international diplomacy.
Indonesia can leverage multilateral channels like the OIC, NAM, and ASEAN+ forums to mediate the conflict and build a coalition of developing countries pushing for a peaceful resolution.

In the context of South-South diplomacy, Indonesia has moral and historical legitimacy to act as a neutral yet principled mediator, particularly in emphasizing the importance of respecting national sovereignty and prohibiting the use of unilateral military force.

This conflict also serves as an important reminder for Indonesia of the urgency to build an adaptive defence system and crisis diplomacy capacity in an era of global uncertainty.
Tensions in the Middle East show that regional conflicts can quickly impact global security, including countries geographically distant from the conflict’s epicentre.

The Threat of Middle Eastern Disintegration

The war between Iran and Israel further exacerbates the long-standing instability in the Middle East.
This conflict reinforces political and security destabilization trends that had previously remained hidden beneath the surface.

Gulf countries like Saudi Arabia and the UAE are now in a strategic dilemma:
On one hand, they are deeply concerned about Iran’s nuclear ambitions, which threaten the regional balance of power.
On the other hand, they are trying to avoid direct involvement, fearing domestic tensions and undermining economic stability, which depends on investment and energy exports.

The situation becomes even more complex with the growing involvement of non-state actors linked to the Tehran axis.
Hezbollah in Lebanon has signalled its readiness to open a northern front against Israel, creating the potential for a multi-front war.

In Iraq, pro-Iran militias have begun launching limited attacks on U.S. military bases, extending the conflict zone from the Levant to Mesopotamia.

Amid this fragmentation risk, countries like Turkey and Qatar are positioning themselves as mediators, offering diplomatic channels to ease further escalation and prevent the conflict from evolving into a full-scale regional war.

The risk of open regional war in the Middle East is not just a military scenario but also a real threat to the region’s socioeconomic development.
The infrastructure that has just begun to be rebuilt in countries like Syria and Yemen is now threatened with destruction due to the spillover of violence from the conflict’s epicentre.

Furthermore, this conflict is causing internal divisions among Arab states.
Some, such as Jordan and Oman, have opted for active neutrality, while others are divided between condemning Israel and distrusting Iran’s regional agenda.

This fragmentation weakens regional solidarity, which has been the foundation for joint diplomatic initiatives, including in the framework of the Arab League.

The region’s failure to respond cohesively strengthens the perception that the Middle East remains an open space for external intervention, while also diminishing the bargaining power of Arab nations in global geopolitics.

Therefore, the Iran-Israel war is not just a matter of two countries or an ideological conflict.
It is a catalyst for regional structural destabilization that could undo decades of reconstruction, peace, and development efforts.

Holistically, the Iran-Israel war is a stark testament to the failure of the international community in preventing the escalation of a conflict that has been ongoing for decades.
The military aggression that began with Israel’s strike on Iran’s strategic facilities, and was followed by Iran’s missile retaliation on Israel’s military centres, reflects a collective failure in managing nuclear crises, ideological rivalries, and unstable regional dynamics.

In an increasingly polarized global landscape, this war proves that regional conflicts can quickly escalate into global crises, impacting security, economy, and international stability.
This war also highlights the fragility of the region’s security system, especially in the Middle East, which has long been a battleground for proxy rivalries between global powers.

The lack of effective regional security mechanisms, weak interstate trust, and the dominance of militaristic approaches makes the region easily combustible in the face of provocations or diplomatic deadlocks.
When political solutions fail and negotiation channels collapse, violence becomes the tragic but real choice made by state actors, sacrificing civilian lives and destroying vital infrastructure.

The impact of this conflict also ripples into the global geoeconomics domain.
The world’s dependency on energy supplies from the Middle East makes this crisis a trigger for market volatility, leading to oil price hikes, supply chain disruptions, and global inflation pressures.

Developing countries, including Indonesia, are threatened by commodity price instability, fiscal vulnerabilities, and trade disruptions, disrupting efforts for post-pandemic recovery and the Ukraine conflict.

In such a situation, regional crises are no longer local but have systemic implications across continents.
Thus, resolving the conflict must go beyond ceasefire agreements.
The world needs a new, inclusive security architecture, not dominated by a single power bloc.

This calls for reform of the international system, emphasizing international law supremacy, respect for sovereignty, and strengthening multilateral institutions.

Indonesia, along with other developing nations, faces both a challenge and a responsibility to serve as a balancing force in an increasingly turbulent world.
With its free and active foreign policy, commitment to peace, and track record in international forums, Indonesia can play an important role in promoting dialogue, building consensus, and reinforcing a fairer international order.

Prof. Dr. Ermaya Suradinata, SH, MH, MS, Expert Council on Geopolitics and Geostrategy, BPIP RI