An Iran war would send shock waves through African energy markets and economies

Nairobi, Kenya — Oil prices, spurred by a war with Iran, are rippling across African economies, threatening new pressure on higher fuel costs, rising inflation and currencies across the continent.

As Africa imports most of the petroleum products it consumes, many economies are increasingly vulnerable to supply disruptions related to tensions in the Middle East, a region central to global oil flows.

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

When global oil supplies tighten, Nedley said, African currencies weaken but prices rise as investors move money into safe-haven assets like the US dollar.

That combination amplifies the impact of price hikes in import-dependent markets such as Kenya and Ghana.

A similar dynamic unfolded after Russia’s full-scale invasion of Ukraine in 2022, Hedley said, when rising crude prices and a weakened currency drove up transportation fuel prices in South Africa by more than 25% within six months.

“Near-term risks come mainly from rising oil prices and weakening exchange rates as investors move to safer assets,” said Brendan Worster, senior economist at Oxford Economics.

Oil markets are particularly sensitive to conflict because of the strategic importance of the Strait of Hormuz, a narrow shipping corridor through which one-fifth of the world’s crude oil passes.

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

Countries like Kenya and Uganda say their supplies are stable even as they work to ensure continuity. Nigeria and Ghana produce crude oil but import their refined petroleum products, limiting the benefits of higher global 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 prices, but ordinary citizens face higher transport and fuel costs and potentially higher interest rates.”

Still, continued high prices could spell doom for Africa’s major oil exporter. Worster noted that Nigeria exports approximately 1.5 million barrels of oil per day and bases its medium-term fiscal framework on oil prices between $64 and $66 per barrel by 2028.

The war pushed prices above $100 per barrel on Monday, which, if sustained, would significantly boost revenues for exporters including Angola, Algeria and Libya.

For most African families, however, the immediate effect will be higher living costs.

“This is a serious concern,” Headley said, noting that much of the food and goods across Africa are transported by road. “Rising energy costs will quickly feed into broader inflation and reduce household purchasing power.”

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

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

“Still, higher oil and gas prices are expected to filter into inflation in the coming months,” Montalto said.

Countries already operating under International Monetary Fund programs face additional pressure as energy import bills drain scarce foreign exchange reserves. Analysts warn that Sudan, The Gambia, Central African Republic, Lesotho and Zimbabwe are among the most vulnerable.

In the long term, the crisis could reinforce calls for African nations to diversify their energy systems and reduce dependence on imported fuels, analysts say.

“It makes strategic sense for African countries to ensure long-term energy security and sovereignty,” said Kennedy Mbeva, a research associate at the University of Cambridge’s Center for Existential Risk Studies.

To achieve that, Mbeva said, there is a need to balance short-term financial pressures with long-term investments in clean energy and green industrialization.

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