Hormuz tensions raise inflation and energy security risks for Africa, says senior investment analyst

Tensions in the Strait of Hormuz have intensified in recent days with Iran warning that oil prices could reach $200 a barrel as attacks on commercial vessels linked to the US, Israel, or their allies continue.

Global oil prices continued to fluctuate over the past week, despite the International Energy Agency (IEA) announcing late on March 11 that all 32 member countries would release up to 400mn barrels of emergency oil reserves in response to supply concerns. 

In a commentary published by the African Energy Chamber (AEC), Rene Awambeng, co-founder and managing partner of Abu Dhabi-headquartered Premier Investment Partners Limited (Premier Invest), shared his assessment of the impact of the Hormuz crisis on African economies.

According to Awambeng, Africa faces “a classic external-price and logistics shock” as a result of Brent crude prices swinging between $120 and $86 per barrel over the last week, up from $70 before the US and Israel attacked Iran, with a significant impact on African economies, supply chains and the cost of living.

“Oil exporters may see fiscal windfalls, but most African countries are net importers of refined fuels and food,” he says. “The near‑term impulse is therefore inflationary, FX‑draining and confidence‑sapping – especially in fragile Sahelian economies.”

Since late February, attacks and threats near the Strait of Hormuz have disrupted shipping. Some carriers and insurers have suspended Gulf routes or raised prices sharply, with war-risk insurance premiums rising almost tenfold on certain routes. Freight costs have also increased, and some vessels are being rerouted around the Cape of Good Hope, adding 10 to 15 days to journeys between Asia and Europe. This has tightened shipping capacity for energy and refrigerated cargo, pushing transport and insurance costs even higher, says Awambeng.

The Strait of Hormuz handles about one-fifth of global oil trade and major liquefied natural gas (LNG) shipments, so disruptions quickly affect energy markets. Sharp increases in global crude prices have raised concerns in Africa about inflation, higher fuel prices and increased transport costs.

“South Africa’s press is already flagging Consumer Price Index (CPI) and interest-rate risks,” Awambeng points out. “For Africa, where most countries import petroleum products, the vulnerability is obvious: when crude spikes and currencies wobble, pump prices and logistics costs rise quickly.”

Regional implications

According to the analyst, regional implications across the African continent are uneven. Higher oil prices may benefit exporters such as Nigeria, Angola, the Republic of the Congo and Gabon, provided production levels remain stable, although these gains can be offset by rising import costs and tighter global financial conditions.

Oil-importing countries, including Kenya, Tanzania, Ghana, Senegal and Rwanda, face higher fuel and freight costs, widening deficits and pressure on foreign exchange reserves. In the Sahel, particularly in Burkina Faso, Niger and Mali, limited fiscal capacity, security concerns and instability mean that rising food and fuel prices could quickly worsen economic and humanitarian conditions.

Nigeria reflects these mixed effects: despite being Africa’s largest oil producer, it still relies on imports, with fuel prices rising sharply amid refinery disruptions and currency pressures. Angola faces similar trade-offs, with higher export receipts on one side and higher import and inflation pressures on the other.

Meanwhile, South Africa is more exposed to inflation. “As a net importer, its regulated fuel price tracks Brent and the rand, meaning the shock threatens to delay rate cuts and lift CPI through transport and food,” says Awambeng.

Beyond oil

Higher war-risk costs and longer shipping routes are reducing fuel availability and pushing up diesel and petrol prices, which feed directly into inflation and raise transport, food and energy costs.

“Fuel is both a first-round CPI component and a second-round input for transport, cooking, milling and cold chains. Africa can therefore expect inflation re-acceleration in fuel-importing emerging markets,” says the analyst.

At the same time, rising fertiliser prices, driven by higher energy costs and disrupted shipments, could affect planting seasons. Delays and limited refrigerated shipping also risk food spoilage and higher import prices.

Awambeng points out that these combined pressures can keep inflation elevated for months, posing serious risks to growth and food security across net-importing African economies. “For low-income and import-dependent countries, that is where the shock becomes most dangerous,” he warns.

Three scenarios

The analyst examines three possible scenarios for the Middle East crisis and gives his recommendations to African governments, financial institutions and energy and logistics agencies.

Under a “prolonged disruption” scenario, Brent prices average $100-120 per barrel, war-risk surcharges remain high and route diversions around the Cape of Good Hope continue. “That would mean higher fuel CPI, wider current account gaps, tighter credit conditions and acute food insecurity in fragile states,” Awambeng says.

In a “partial normalisation” scenario, Brent crude settles at $85-100 and shipping schedules normalise, although still with longer transit times and added surcharges. “That would still be inflationary, but manageable with targeted fiscal measures and liquidity support,” says the analyst.

Under a “rapid de-escalation” scenario, Brent declines toward $70–80 and inflationary pressure eases, though the loss of market confidence persists.

Recommendations

Based on these scenarios, Awambeng suggests that finance ministries and central banks in African countries revise budgets with Brent price sensitivity tables at $90, $100 and $120, adjust fuel taxes and subsidies, and reassess foreign exchange assumptions.

For energy and logistics agencies, he recommends establishing formal crude-to-refinery arrangements with pre-arranged war-risk cover and using stock draws or product swaps where possible.

Agribusiness and food-importing state-owned enterprises (SOEs) should lock in supplies of fertiliser and key imports early, while improving logistics. Additionally, banks and corporates need to adjust trade terms and strengthen working capital structures to reflect longer shipping and inventory cycles.

Awambeng emphasises that the Sahel, where security issues, aid shortfalls and import price hikes create a high risk of food shortages and social instability, requires special attention. Coordinated support on food, fuel and security is critical in preventing a deeper regional crisis. He also suggests accelerating investment in decentralised energy solutions, such as mini-grids and solar-powered cold-chain solutions, to reduce long-term import dependence.

“Africa cannot assume that a temporary oil spike is just a market event. This is a broader logistics, inflation and resilience shock,” the analyst concludes. “Exporters may enjoy a windfall, but importers will feel the pain first and fragile states will feel it hardest. The countries that move fastest – on budgets, supply security and targeted support – will be the ones best positioned to manage the fallout.”