Iran war oil price shock threatens to disrupt African economies

As the war between the United States, Israel, and Iran widens across the Middle East, it threatens to disrupt recent gains made by some African economies.

A weaker dollar and lower interest rates had offered some breathing space for indebted nations, but the spike in fuel prices has revived inflation concerns and risks weakening local currencies.

In South Africa, a fuel price increase across all grades has already been confirmed, reflecting higher global crude prices and a weaker rand.

Tanzania has also announced an increase with diesel recording the highest rise compared to kerosene and petrol.

And Senegal’s prime minister on Tuesday chaired a special meeting aimed at securing fuel supplies and protecting vulnerable households.

But fuel prices and their knock-on impact are not the only concerns.

As shipping giants suspend operations through the strategically vital Strait of Hormuz bordering Iran, there are fears of prolonged disruption to global trade.

And if the conflict persists, budgets across Africa will feel the strain of soaring logistics and supply-chain costs. 

The sea route is also critical for urea and nitrogen fertiliser exports making it vital for global agriculture and raising fears of its impact on food availability and prices.

In addition African airlines, heavily reliant on transit points in the Middle East, have had to suspend or reroute connections to the region – adding time and fuel costs, and stranding citizens.

But analysts suggest countries like Nigeria and Angola could have short-term benefits due to their oil resources.

Some Horn of Africa countries hosting US bases are also vulnerable to potential Iranian strikes.

Meanwhile, South Africa’s President Cyril Ramaphosa said it would be willing to play a mediating role ‌in the conflict if asked.

With no end in sight to the war, rising oil prices, disrupted supply chains across a range of products, and market volatility over fears it could drag on, the news in the short-term is not good.