Rising Oil Prices From Iran Conflict Threaten Africa’s Economic Recovery

African officials warn that rising oil prices linked to the Iran conflict could threaten Africa’s economic recovery. The increase in fuel costs may push up inflation, weaken currencies, and force central banks to pause interest rate cuts, while also affecting key sectors like mining.

African officials have warned that the sharp rise in global oil prices triggered by the ongoing conflict involving Iran could pose serious challenges for monetary policymaking across the continent. The surge in energy costs may also undermine productivity in critical sectors such as mining and manufacturing, threatening Africa’s fragile economic recovery that has gradually been taking shape after years of inflationary pressures and currency instability.
Central banks across several African economies, including those in Accra and Luanda, had recently begun easing monetary policy by cutting lending rates. These moves were largely supported by declining inflation levels and relatively stable foreign exchange markets. Policymakers hoped that lower interest rates would stimulate investment, increase borrowing by businesses and households, and help accelerate economic growth.
However, the recent spike in oil prices may force many of these institutions to reconsider their strategies. Rising energy costs can quickly feed into higher inflation through transportation, production, and distribution expenses, potentially reversing the progress made in stabilising prices. As a result, the rate-cutting cycle that many countries had started may now be paused or slowed.
Uganda’s central bank acknowledged the growing challenges facing policymakers in the current global environment. In comments to Reuters, the bank noted that periods of heightened uncertainty have increasingly become a defining feature of the global economic landscape. These uncertainties, it said, are creating new and unprecedented difficulties for central banks worldwide as they attempt to balance price stability with economic growth.
The Ugandan central bank, which had already taken a cautious stance even before the conflict escalated, indicated that it would reassess its policy tools and operational processes to ensure they remain effective in navigating the difficult economic environment.
In Angola, the central bank decided to hold interest rates steady on Thursday following three consecutive rate cuts. Governor Manuel Tiago Dias explained that the decision reflected rising global risks associated with the prolonged conflict in the Middle East.
According to Dias, the main concern is the possibility that the war could drag on, disrupting global supply chains. Such disruptions could particularly affect the availability and cost of agricultural inputs and fertilisers, which are essential for food production and economic stability in many African countries.
Economic analysts say other major central banks across the continent may soon be forced to reassess their policies as well. Countries such as Ghana, Nigeria, Zambia and Kenya, which had been expected to continue easing monetary policy, may now halt further interest rate cuts in response to the uncertain outlook.
Razia Khan, chief economist for the Middle East and Africa at Standard Chartered, said central bankers will need to carefully evaluate the potential “pass-through” effects of rising oil prices. This refers to the process by which higher fuel costs spread throughout the economy, pushing up transportation costs, food prices and other goods, eventually feeding into broader inflation.
Investment bank JPMorgan has already adjusted its projections in response to the unfolding crisis. The bank scaled back its expectations for interest rate cuts in Nigeria, Kenya, Ghana and Zambia, citing the uncertainty created by the conflict and the pressure from higher oil prices.
In a research note, JPMorgan stated that with the exception of Angola, it had reduced the scale of the interest rate cuts it had previously anticipated for these economies.
Global oil markets have already reacted strongly to the conflict. Brent crude futures were trading just under $100 per barrel on Friday, after reaching nearly $120 earlier in the week during peak market anxiety.
Charlie Robertson, head of macro strategy at FIM Partners, warned that sustained high oil prices could significantly affect African economies. He said that if oil prices average around $100 per barrel for a full year, many countries across the continent could experience declining foreign exchange reserves.
Robertson also predicted that several African currencies might weaken by around five percent under such conditions, as higher fuel import costs place additional pressure on national budgets and balance of payments.
Despite the seriousness of the situation, some governments say there is no immediate cause for panic. Kenya, which is a net importer of oil, has already seen its government bonds decline since the crisis began, reflecting investor concerns about rising import costs.
However, Kenyan authorities insist that the country currently has sufficient fuel stocks to meet demand in the short term.
Energy Minister Opiyo Wandayi said there was no immediate cause for alarm, noting that the country still has secure fuel supplies. He added that the government is closely monitoring developments in the global oil market and remains ready to respond if necessary.
Elsewhere in the region, neighbouring Ethiopia has increased fuel subsidies in an effort to shield consumers from rising energy prices. The move is intended to reduce the burden on households and businesses while global markets remain volatile.
In Zambia, the government has issued warnings to fuel retailers against hoarding petroleum products. Authorities emphasised that the country currently has adequate fuel reserves and cautioned businesses against exploiting the situation to create artificial shortages.
Economists warn that the renewed pressure from energy prices could still slow economic progress across the region. Africa’s recovery remains fragile after years of economic shocks, including the COVID-19 pandemic, supply chain disruptions and currency depreciation.
One sector that could be particularly affected is mining, which plays a crucial role in generating export revenues and foreign exchange for several African countries.
Zambia’s Minister for Mines, Paul Kabuswe, said rising fuel costs could directly affect productivity in the mining industry, as energy is a key input in extraction, transportation and processing activities.
Kabuswe told Reuters that if fuel prices increase significantly, mining operations may become more expensive, potentially reducing output and limiting a major source of hard currency for the country.
Expressing hope for stability, he added that Zambia, like many other nations, is hoping for a swift resolution to the conflict.
“Our prayer is that the war should end,” he said.