Iran war sends shockwaves through African fuel market and economies

NAIROBI, Kenya (AP) — A spike in oil prices sparked by a war with Iran is ripple across African economies, threatening higher fuel costs, higher inflation and putting new pressure on currencies across the continent.

Africa relies on imports for most of the petroleum products it consumes, leaving many economies highly vulnerable to supply disruptions caused by tensions in the Middle East, the epicenter of global oil flows.

“Africa is a net importer of petroleum products, which means it is highly exposed to such shocks,” said Nick Headley, energy transition research analyst at Zero Carbon Analytics.

When global oil supplies tighten, prices rise, while African currencies tend to weaken as investors move funds into safe-haven assets such as the U.S. dollar, Nedley said.

This combination amplifies the impact of soaring prices in import-reliant markets such as Kenya and Ghana.

Headley said a similar situation emerged after Russia’s full-scale invasion of Ukraine in 2022, when rising crude oil prices and a weak currency pushed South African transport fuel prices up more than 25% in six months.

“The main near-term risks come from higher oil prices and weaker currencies as investors turn to safe-haven assets,” said Brendan West, senior economist at Oxford Economics.

Oil markets remain particularly sensitive to conflict due to the strategic importance of the Strait of Hormuz. The Strait of Hormuz is a narrow shipping corridor through which about one-fifth of the world’s crude oil passes.

The impact of rising oil prices will be uneven across Africa.

Countries such as Kenya and Uganda say supplies remain stable despite their efforts to ensure continuity. Nigeria and Ghana produce crude oil but import most of their refined petroleum products, limiting their gains from rising global oil prices.

“It’s hard to say at this point whether they’ll see a net benefit,” Headley said. “Oil producers may benefit from higher crude oil prices, but ordinary citizens may face higher transportation and fuel costs, as well as potentially higher interest rates.”

Still, persistently high oil prices could bring a windfall to Africa’s major oil exporters. Verster noted that Nigeria exports about 1.5 million barrels of oil per day and that its medium-term fiscal framework is based on an oil price of $64 to $66 per barrel by 2028.

The war pushed oil prices above $100 a barrel on Monday, a level that if sustained would significantly boost revenues for exporting countries such as Angola, Algeria and Libya.

However, for most African households, the immediate impact is likely to be an increase in the cost of living.

“This is a serious problem,” Headley said, noting that most food and goods across Africa are transported by road. “Rising fuel costs can therefore quickly trigger wider inflation and reduce household purchasing power.”

The crisis is also testing African economies, said Peter Attard Montalto, managing director of South African consultancy Kruthan.

“So far, for a country like South Africa, the impact has been really small,” he said, noting that recent economic reforms have helped stabilize the country’s currency and bond markets.

“Nonetheless, higher oil and gas prices are expected to weigh on inflation in the coming months,” Montalto said.

Countries already operating under IMF programs could face additional pressure as energy import bills deplete scarce foreign exchange reserves. Analysts warn that the most vulnerable countries include Sudan, Gambia, Central African Republic, Lesotho and Zimbabwe.

Analysts say that in the long term, the crisis may intensify calls for African countries to diversify their energy systems and reduce their reliance on imported fuels.

“Ensuring long-term energy security and sovereignty is of strategic importance to African countries,” said Kennedy Mbewa, a researcher at the Center for Existential Risk Studies at the University of Cambridge.

Mbewa said achieving this would require balancing short-term fiscal pressures with long-term investments in clean energy and green industrialization.

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