The attacks by the US and Israel on Iran, which started on 28 February 2026, upended key supply chains, driving oil prices above US$100 a barrel. The spike followed Iran’s closure of the Strait of Hormuz in response to the US and Israeli action. About 20% of the world’s oil supplies are transported through the strait.
In the words of the International Energy Agency:
The war in the Middle East is creating the largest supply disruption in the history of the global oil market.
The impact is being felt by countries across the globe. African countries are no exception, including those that produce oil.
We asked scholars from Nigeria, South Africa, and Kenya to answer the question: Is the spike in oil prices hurting your country’s economy?
The answer was a uniform “yes”. The universal fear is the effect the rise in prices is having on fuel, a staple commodity in every one of the countries for ordinary people as well as industries. In some cases, such as in Ethiopia, the government has already introduced fuel subsidies to shield people from the impact of higher fuel prices.
The fear that higher prices and outright scarcity could have damaging effects, notably on food production, was also near universal.
For some, there may be a silver lining: Kenya and Senegal are in the early phases of oil production. But they’re some way off reaping the benefits of higher prices. And in the case of Nigeria, the danger is that any windfall that comes its way won’t ease the economic burden faced by ordinary people.
Nigerians should brace for inflation, Stephen Onyeiwu, Professor of Economics & Business, Allegheny College
The Iran war is bad news for Nigeria.
Even though it’s an oil-producing country, earning US$45.6 billion from oil exports or 80% of export revenue in 2023, the windfall from the rise in prices is unlikely to compensate for high import costs and the overall threat of rising prices.
First, the negative effects.
The oil price hike will raise production costs in many sectors of the global economy. This will affect Nigeria. Before the US and Israel launched attacks on Iran on 28 February, global inflation had been declining, from a peak of 8.7% in 2022 to less than 4% early in 2026. But the world now faces the risk of another era of inflation.
As Nigeria depends on imports, Nigerians should expect to pay more for goods and services, especially if the war persists. In 2024, the country spent about US$47.2 billion on imported goods like mineral fuels, machinery, electrical equipment, vehicles, plastics, cereals, pharmaceuticals, furniture and bedding. An increase in the global inflation rate would push up Nigeria’s import bill.
This is likely to exceed any windfall gains from the oil price increase.
Inflationary expectations could also result in merchants and firms in the formal and informal sectors raising their prices, causing a general increase in the economy’s overall price level.
In other words, Nigerians should brace for inflation, should the Iran war continue for several weeks. Nigeria has been struggling with rising prices. In 2025 inflation was about 27%.
Food insecurity is another worrisome fallout. There is a strong correlation between oil price, inflation and fertiliser cost. Nigerian farmers will be hurt by the rising cost of fertilisers, which they will pass on to consumers by way of higher food prices.
To be sure, there will be oil windfalls. Assuming that Nigeria’s oil production holds steady at a five-year average of about 1.3 million barrels per day and isn’t hampered by oil theft and production bottlenecks, the projections are that the country could earn between US$1.66 billion and US$21.8 billion in additional oil revenue, depending on the duration of the war. The lower projection could happen if the war lasted for a few weeks, while the upper bound would be the case if it lasted for months.
A windfall would be a welcome development for most countries. But Nigeria has an unsavoury history on this front. For instance, during Operation Desert Storm when the US launched attacks on Iraq in January 1991, Nigeria earned about US$12 billion in oil windfalls. But a lack of transparency meant that Nigerians never knew how much extra money the country had actually earned, or how it had been used.
A special panel had to be set up by a subsequent administration to investigate how much windfall had been earned and how it had been spent. The probe found that Nigeria had indeed earned US$12.4 billion, but could not find any record of how the money had been spent.
Nigeria lacks effective institutional frameworks for channelling oil windfalls into productive investments. It has systems in place, but they need more funding to have an impact.
The Nigerian Sovereign Investment Authority was set up as an independent investment body to support Nigeria’s quest for long-term economic development. It had US$35 billion in assets in 2026, and has invested in solar, medical, infrastructural, industrial and agricultural projects.
In addition, the government established an Excess Crude Account to ringfence earnings from oil windfalls. This ensures that funds are shared among different tiers of government, during periods of low crude oil revenue.
Some of the spending from the Excess Crude Account is expedient. For example, the money is sometimes used to cover budget deficits rather than to invest in new projects. There is also evidence that corruption eats into it and that it’s used to finance the ostentatious lifestyles of top government officials and political elites.
Ordinary Nigerians rarely benefit directly from oil windfalls.
The funds, in my view, would have greater impact if they were used to resuscitate the country’s moribund manufacturing sector, or invested in Nigeria’s crumbling infrastructure and educational and health facilities.
And apart from the lack of prudence and accountability, oil windfalls typically distract policy makers from taking measures to address structural problems in the economy. Windfalls from rising oil prices create the illusion that the economy is healthy. There’s an inflow of foreign exchange, external reserves look robust and there’s temporary liquidity in the foreign exchange market. An example is the 1973 oil windfall, when Nigeria was so awash with cash from oil exports that the head of state at the time said Nigeria’s problem was not the lack of money, but how to spend it.
Additionally, oil windfalls change relative prices and opportunities in favour of the oil sector and make non-oil sectors like agriculture and manufacturing less attractive.
In South Africa, disruptions to oil supplies are already causing pain – Rod Crompton, Visiting Adjunct Professor, African Energy Leadership Centre, Wits Business School, University of the Witwatersrand
South Africa produces no oil or natural gas, leaving it fully exposed to volatile international prices. The economy relies heavily on imported liquid fuels – petrol, diesel and jet fuel.
Given the spike in the price of oil this means that costs will be driven up across every sector. Even electricity prices are likely to rise. This is because diesel is used in power stations during production peaks. It’s also used to back up coal-fired and concentrated solar plants (using mirrors to concentrate sunlight).
So how do prices spread?
Liquid fuels like petrol, diesel, jet fuel and paraffin derive mainly from crude oil. When crude prices climb, so do theirs. South Africa uses “import parity pricing” for most fuels – the estimated cost to import them. The Department of Mineral Resources and Energy uses a methodology that lists all the costs of importing fuels and calculates the total price – the import parity price.
After the recent attacks on Iran began, average import parity pricing petrol prices jumped nearly R4.76 (30 US cents) per litre (23%) in just 10 days.
Regulated fuels include petrol, paraffin and residential liquid petroleum gas (LPG). The prices of these are adjusted only on the first Wednesday of each month. This means that global shocks are delayed a bit.
Unregulated fuels include diesel, jet fuel, fuel oil, bunker fuel and aviation gasoline. Sellers adjust prices immediately. For instance, some airlines added temporary fuel surcharges to tickets just four days after US and Israeli strikes on Iran.
Disruptions to oil supplies are already causing pain. Shortages were already evident by 12 March 2026. Nine days after the Iran attacks, South African farmer supplier Oos-Vrystaat Kaap closed its diesel order book. Some agricultural co-ops limited sales to 80 litres per customer per day.
This limits farming operations, reducing the supply of agricultural goods on the market and driving up food prices or causing food shortages, or both.
In the 1973 oil crisis South Africa was forced to ration fuel. Service stations were closed after 6pm and over weekends. The speed limit was reduced to 80km/h to conserve fuel. If the Iranian conflict is protracted the government may introduce similar rationing.
Gas prices track oil. They too have spiked due to the Iranian disruptions. Like petrol, they are regulated, so consumer impacts lag slightly.
There may be a silver lining in higher oil prices for Kenya – XN Iraki, Professor, Faculty of Business and Management Sciences, University of Nairobi
Kenya will feel the impact of the price hikes because the country imports most of its oil from the Middle East – largely from the United Arab Emirates. Iranian drones hit the UAE’s major bunkering hub and crude export terminal port in mid-March 2026.
This will affect the arrival of new stock, which is likely to come in at a higher price. Energy prices internationally are eventually reflected at local fuel pumps.
The Kenyan government controls the price consumers pay for fuel, and is likely to ramp it up in the next cycle. Prices are set every 15th of the month.
The government has the option of subsidising the price of fuel. Most of the fuel consumed in Kenya is diesel, followed by petrol.
Subsidising diesel would bring political gains. Most public transport and commercial vehicles use diesel. A rise in its price would raise bus fares and other transport costs.
A steep rise in prices could have political consequences; Kenya’s next general election is in 2027 and higher fuel prices and subsequent inflation would be bad news for the current government. This would raise the cost of living in a country with a high youth unempoyment rate of 67% and memories of violent protests over state efforts to raise taxes.
Kenya’s Options
There are two reasons the government is unlikely to go the subsidies route.
Firstly, the country is operating under a budget deficit of about 4.8% of its gross domestic product.
The finance ministry is unlikely to opt for increasing this gap to pay for fuel subsidies. It has other development priorities, like affordable housing and universal healthcare. Additionally, Kenya’s fiscal space is constrained by high debt payments and tax shortfalls.
Secondly, international lenders like the International Monetary Fund (IMF) are against government subsidies as they don’t always benefit the needy or the poor. The IMF is one of Kenya’s major lenders. In addition, subsidies, if not well targeted, can be a drain on the economy. They are sometimes given based on political instead of economic considerations.
It is also unlikely that Kenya can tap other countries – like Angola or Nigeria – for oil any time soon. Oil is traded through contracts for future delivery, which makes finding alternative markets tougher. These contracts are also used to hedge agaist price fluctuations.
Even the release of strategic oil reserves by a number of countries like the US and Japan has not eased prices. The market has interpreted the quantity released as too little, and maybe too late.
Switching to alternative energy sources is also difficult. Cars, trains, generators or planes can’t be modified overnight. Further, the price of gas – the alternative to oil for heating and power generation – is going up.
Another approach to stabilising prices would be for Kenya to increase oil production to take advantage of rising prices. Kenya discovered oil in 2012 but exploitation has been delayed by logistics. Higher oil prices could make exploitation viable. Kenya still imports most of its oil despite this discovery.
But ramping up oil production isn’t easy. It is capital intensive, requiring exploration for new wells and building infrastructure often in remote areas far from roads and ports or in deep waters. In Kenya, oil prospecting in the arid Turkana region in the north is an example of this.
Kenya, like many other countries, will have to ride the current situation out.
Consumers should brace themselves for an increase in prices across the board. One of the key drivers of inflation is the price of fuel and energy. The annual inflation rate was 4.3% in February 2026.
The oil price increase will initially be felt in the cost of transport, electricity bills and in all sectors that use energy in production. In the medium term, no sector will escape an increase in energy prices.
There may be a silver lining in higher oil prices for Kenya. This could make it possible for the country to competitively exploit its oil for export to markets desperate for alternative sources of oil like India and China.
Stephen Onyeiwu, Professor of Economics & Business, Allegheny College; Rod Crompton, Visiting Adjunct Professor, African Energy Leadership Centre, Wits Business School, University of the Witwatersrand and XN Iraki, Professor, Faculty of Business and Management Sciences, University of Nairobi
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Incredible points. Outstanding arguments.
Keep up the good work.