Generally speaking, conflicts lead to the disruption of energy markets and shipping routes, trade sanctions, shortages of fertilizers and other inputs, disruption of food supply chains, and domestic food price inflation linked to resultant political unrest. For instance, the prolonged Russia-Ukraine war is the greatest supply chain threat to the global economy today.
Unfortunately, on June 12, Israel launched rounds of attacks on several locations in Iran, including the Natanz nuclear site and Tabriz. Prime Minister of Israel Benjamin Netanyahu said strikes targeted Iran’s nuclear and ballistic missile programs and that the operation would continue until the threat was removed. Hours after the first Israeli strikes, Tehran launched more than 100 drones.
Again, African countries are walking a delicate balance between their Middle Eastern partners and their own regional interests. The conflict, though distant, pulls Africa into its orbit and may soon start forcing governments to confront the rising prices of essential goods, dwindling investment, and growing uncertainty that erode the foundations of economic growth.
Behind the Headlines: The African Economic Shifts
Exports from Israel’s Tamar and Leviathan gas fields have halted, negatively affecting Egypt. As a major recipient of Israeli gas, Egypt faces potential revenue losses. Within days of the war’s onset, the Egyptian stock market recorded its steepest drop in five years. Investor fears over regional instability, combined with a sharp decline of the Egyptian pound below 50 per USD, are fueling inflation. Key impacted sectors include energy (gas supply cuts), tourism (security concerns), and trade (rising insurance premiums and ship diversions away from the Red Sea and Suez Canal).
In the meantime, markets are facing several shocks from escalating tensions in the Middle East. Economists at the Bureau for Economic Research (BER) warn that these global geopolitical risks will likely spill over into local markets. According to the BER, Israel’s retaliatory strike was largely expected, so the impact on oil was not as big as it could have been.
However, the geopolitical risk premium attached to prices is significant, as current demand and supply fundamentals would normally suggest a lower oil price, it said. “There is concern that a sustained spike in the oil price would fuel inflation and reverse the expectations for rate cuts—with detrimental impacts for economic growth… Spikes, temporary or more sustained, in the oil price remain a real possibility,” the BER said.
The theme of ‘higher for longer’ interest rates has spread in the global and local narrative, but the BER said this is more concentrated in the US than in Europe, where indications are that rate cuts are around the corner. However, given its impact on local markets, South Africa is likely to follow the US Fed’s moves more closely. According to Investec chief economist Annabel Bishop, the prospects for rate cuts in South Africa in 2024 are dimming, with the first cuts now only seen at the end of the year (November), if at all.
Lately, the rand weakened roughly 1.6% after recent Israel-Iran airstrikes and hovered near one-month lows at 18.1 ZAR/USD. Bond yields in economies like South Africa are rising; the 2035 government bond yield increased by up to 16.5 basis points, reflecting heightened risk premia.
Besides, foreign direct investment (FDI) and portfolio inflows into the economies of Nigeria and other West African nations may sharply fall as a result of the Israel-Iran conflict. This is the position of SBM Intelligence in its most recent insight, “The Escalating Iran-Israel Conflict and its Implications for West Africa.”
According to the company, “An escalation in direct military engagement between Iran and Israel has raised significant global concerns, creating a complex and perilous situation with repercussions for international security and the global economy. For West Africa, this presents a double-edged sword of short-term economic opportunity against a backdrop of significant long-term political and security risks.”
African Economies and the Israel-Iran Dynamics: What to Watch
Higher oil prices and potential disruptions at the Strait of Hormuz or the Red Sea trade routes pose a serious threat to fragile economies in Sudan, Ethiopia, and Somalia. These nations, already burdened by conflict, could face inflationary shocks in food and fuel imports.
About a fifth of the world’s total oil consumption passes through the Hormuz Strait between Oman and Iran. Disruption here could push oil above $100, analysts say. Blocked shipping routes would compound any supply shock. Though the big oil-producing countries that make up OPEC+ have promised an extra 1.2 million barrels a day, none has yet been shipped or delivered, said hedge fund Svelland Capital director Nadia Martin Wiggen.
Blocked shipping routes would mean this expected supply would not come into the international market, she said. She’s watching freight rates closely. “So far, freight rates show that China, with the world’s biggest spare refining capability, hasn’t started panic buying oil on supply concerns,” said Wiggen.
Likewise, analysts have said the fresh wave of geopolitical tensions between both countries may soon translate into higher fuel prices in Nigeria. Oil prices spiked sharply after the strikes, which also reportedly killed senior Iranian military commanders. Brent Crude soared by as much as 13% in intraday trading—the largest jump since March 2022—before settling at a 7.6% gain.
Speaking to Nairametrics, Jide Pratt, country manager of TradeGrid and COO of Aiona, emphasized the direct connection between Middle Eastern instability and fuel prices in Nigeria.
“Iran, being a major oil-producing nation, is a trigger for the prices of crude oil,” Pratt explained. “As such, with the bombing, the immediate effect we see is that prices of Brent have gone up to $78 and now about $73 as an immediate reaction.”
He added that, should tensions escalate further, the consequences could be even more severe. “If this escalates, then the prices will go up, and so will the prices of distillates here in Nigeria and across the world.”
“While the oil price spike may bring increased revenue to the Nigerian government, analysts stress the need for prudent financial management. In all, more revenue for the federal government and states—if they spend it in a frugal way,” Pratt noted.
Energy economist Edwin Eze of the Abuja-based Centre for Energy Policy also noted, “For Nigeria, that could mean an increase in landing costs and ex-depot prices, which may eventually be passed on to consumers.”
Way Forward
African nations such as Nigeria have been calling for de-escalations. In a statement, the Minister of Foreign Affairs, Ambassador Yusuf Tuggar, expressed grave concern over the recent escalation marked by sustained missile and aerial exchanges between the two nations. He called on the international community, particularly the United Nations Security Council, to intensify efforts towards immediate de-escalation and to facilitate constructive dialogue.
Africa’s economic vulnerabilities—especially in energy and trade—will deepen. The diplomatic balance between pro-Iran and pro-Israel states may shift. Benjamin Augé, a researcher with the Africa and Climate program at the French Institute for International Relations, spoke to RFI about the practical and diplomatic consequences for Africa.
He said, ‘‘I think it’s important to recall the historical context of Israel’s and Iran’s relationships with Africa. Israel had extremely strong ties with many African countries during the 1950s, 1960s, and 1970s—until the Yom Kippur War, when most of them severed diplomatic relations with Israel.
Augé indicates that since [Prime Minister] Benjamin Netanyahu returned to power in 2009, his objective has been to rebuild those relationships. Currently, more than 40 African countries have diplomatic ties with Israel. But that doesn’t necessarily mean Israel wields significant influence in Africa.
‘‘Since the 7 October, 2023 attacks [by Hamas on Israel] and Israel’s subsequent war in Gaza, many of its normally pro-Israel partners—Togo, Cote d’Ivoire, Cameroon, and Rwanda—have kept their distance. Rwanda even began delivering aid to Gaza as early as 20 October 2023. So we’re already seeing Israel’s diplomatic position in Africa under significant strain,’’ he told RFI.
Although some experts are of the opinion that the conflicts have influenced foreign policy positions of African countries faced with two choices: taking sides or remaining neutral. They also conclude that Africa’s adoption of technology in supply chain processes is critical in maintaining effective and efficient supply chain systems to foster resilience in disruptive conflict situations.
While recent conflicts provide few useful lessons, both strategic neutrality (Ukraine) and principled positions (Gaza) have irked international powers. In the short term, strained fiscal and monetary war chests mean little can be done to mitigate the impacts of such shocks.
Over the longer term, resilience and domestic self-sufficiency are vital. Economic diversification, greater regional and trade integration, and pragmatic diplomacy should be the focus. Policymakers must use Africa’s collective bargaining power, enhance domestic capital markets, and negotiate smartly with resource-hungry global powers to maximize economic benefit.
At this point, for emerging markets, according to the International Monetary Fund (IMF) in June 2025, to preserve financial stability, stress tests should adequately account for the impacts on banks and non-banks of higher sovereign interest rates and potential bouts of market illiquidity. Upgrading market infrastructures to improve trading, price discovery, and market depth is also a key policy priority, even in the most liquid sovereign debt markets.