How the Middle East conflict is squeezing currencies in Africa

• As oil prices surge 50% to over $100 per barrel amid a supply chokehold on the Strait of Hormuz, the AfDB warns of a lost decade for vulnerable economies in Africa, while a few unexpected winners emerge.
• As of March 24, 2026, the bank recorded that 29 African countries have seen their currencies depreciate against the U.S. dollar since the conflict’s escalation.

Two years after the global inflation shock of 2024, Africa is once again staring into the fiscal abyss. But this time, the trigger is not a pandemic or a European land war. It is a widening Middle East conflict that has already sent oil prices soaring by 50 per cent since early March, pushing up to 29 African currencies into free fall.

What’s more, the war in Iran threatens to turn a trade shock into a full-blown cost-of-living crisis across the continent, the African Development Bank (AfDB) has warned.

According to a new assessment from the AfDB dubbed a 2026 Macroeconomic Performance and Outlook supplement obtained by The Exchange, a six-month conflict in the Middle East threatens to shave 0.2 percentage points off Africa’s GDP growth this year.

While that may sound modest, for countries already growing below their pre-COVID trajectories, with debt service ratios hovering near distress levels, the margin for error has evaporated.

“The longer the conflict lasts and the more severe the disruption to shipping routes and energy and fertilizer supplies, the greater the risk of a significant growth slowdown across the continent,” the report warns. “This conflict, which already has triggered a trade shock, could quickly turn into a cost-of-living crisis through higher fuel and food prices, rising shipping and insurance costs, exchange rate pressures, and tighter fiscal conditions.”

For the 1.4 billion people of Africa, many of whom spend 60 to 80 per cent of their household income on food and fuel, that is not an abstraction. It is the difference between a meal and hunger, between keeping a small business open or closing it.

Currency Crash: 29 Nations in the Red Zone

The most immediate transmission mechanism, the AfDB notes, is the currency channel. As of March 24, 2026, the bank recorded that 29 African countries have seen their currencies depreciate against the U.S. dollar since the conflict’s escalation.

The list includes major economies such as Nigeria, Kenya, and Egypt, as well as smaller, highly import-dependent states like Senegal, Cabo Verde, The Gambia, and war-ravaged South Sudan.

Depreciation does two things at once. It raises the local-currency cost of servicing external debt, much of which is denominated in U.S. dollars or Euros. Depreciation also makes imported food, fuel, and fertilizer more expensive. For countries that import more than 60 per cent of their wheat and 80 per cent of their refined petroleum, that is a direct tax on the poor.

“These pressures could combine to exacerbate a fiscal squeeze, especially in countries with high debt service, large fuel and food import bills, and weak reserves,” the report states, naming Senegal, Sudan, Cabo Verde, South Sudan and The Gambia as particularly exposed.

Senegal, for example, has experienced robust growth from its nascent oil and gas sector; however, it remains a big importer of refined products and cereals. A 50 per cent oil price shock, layered on top of a depreciating CFA franc (which, despite its peg to the euro, loses value against the dollar when the euro weakens), threatens to blow a hole in its 2026 budget.

Worse, across the continent, central banks are getting increasingly caught in a classic dilemma. On one hand, if policymakers raise interest rates to defend the currency, they risk choking off private investment. On the other hand, if they burn reserves to smooth volatility, they leave the fragile economies unprotected for the next shock. Do nothing, and inflation accelerates.

According to the AfDB, “Central banks should implement flexible strategic monetary and exchange rate policies, curb cash hoarding and foreign exchange market speculation during episodes of depreciation… in coordination with ministries of finance, to balance price and exchange rate stability with growth objectives.”

Put simply, policymakers are urged to stop panic-buying of U.S. dollars, cease speculating, and pray that the conflict ends before their economies’ reserves run dry.

Middle East conflict and fertiliser time bomb

If thinning oil supplies amid the roiling Middle East conflict is the headline, fertiliser is the hidden catastrophe. The Middle East, particularly the Gulf states, is a critical supplier of liquid natural gas (LNG), which is the primary feedstock for ammonia and urea production, the building blocks of nitrogen fertiliser.

Ongoing disruptions to LNG supply chains through the Strait of Hormuz, through which nearly 90 per cent of Persian Gulf oil exports and a comparable share of LNG pass, are directly hitting fertiliser manufacturing.

“For some African countries, the fertilizer channel may be even more consequential than the oil shock,” the AfDB warns. “Disruptions to Gulf LNG supply would affect ammonia and urea production, raising fertilizer costs and constraining supply during the crucial March-to-May planting season.”

That planting season is now. Farmers from Kenya to Nigeria to Zimbabwe are preparing their fields. If fertiliser prices double or triple, as they did after Russia’s invasion of Ukraine in 2022, they will either use less, leading to lower yields, or pay more for the vital farm input, effectively raising food prices. Either way, the most vulnerable households will bear the heaviest hit.

The AfDB projects “significant negative impacts on food security” across the continent. That is a diplomatic way of saying that millions could face hunger, and food import bills, which are already swollen due to currency depreciation, will certainly force governments to choose between paying for bread or paying bondholders.

Winners and losers

Not every African economy will suffer equally from the Middle East conflict. The AfDB, in a striking departure from blanket pessimism, identifies a handful of potential short-term winners.

Nigeria stands to benefit from higher oil prices, a classic petro-state windfall, and from the expanded output of the Dangote Refinery, Africa’s largest single-train refinery, which is finally ramping up production. If the refinery can displace expensive imported petrol with locally refined product, Nigeria could reduce its own import bill while exporting more refined fuels to neighbours.

Mozambique, which has been struggling to revive its LNG projects after an Islamist insurgency halted operations, could gain “renewed momentum” if global buyers seek alternatives to Gulf gas. The Port of Maputo is already seeing increased traffic as shipping lines reroute away from the Red Sea.

South Africa’s Durban port, Namibia’s Walvis Bay, and Mauritius are also beneficiaries of the shipping re-routing around the Cape of Good Hope. With Houthi attacks in the Red Sea and Gulf tensions escalating, maritime insurers are pricing the Suez route at a premium. The Cape route is longer but safer, and that means bunkering (refuelling), warehousing, and maritime services are booming in the southern Africa corridor.

Kenya is also emerging as a logistics hub through the new Lamu Port and its Nairobi air cargo cluster. Ethiopian Airlines, Africa’s largest carrier, is capitalising on its role as “the emergency air bridge linking Asia, Africa, and Europe,” according to the AfDB.

But, and it is a crucial but, “these gains are likely to be uneven and may not offset the wider inflationary, fiscal, and food-security pressures affecting the continent.” In other words, a few corporate balance sheets and port authorities will do well. The average family will not.

The new scramble for Africa

Beyond economics, the AfDB warns that a wider Middle East conflict could intensify competition for influence in Africa, a competition that is already reshaping the security landscape from Sudan to the Sahel.

“Regional conflicts in fragile contexts, such as Sudan, Somalia, and Libya, are already shaped by external sponsorship, arms flows, as well as rivalry over the control of ports, critical minerals, and Red Sea security,” the report notes.

The United States, Gulf states (especially Saudi Arabia and the UAE), China, Russia, Iran, and Turkey are all jostling for position. Iran, in particular, has been expanding its presence in West Africa and the Horn, while Turkey has built a large military base in Somalia and signed defence deals with Niger and Libya.

A wider war could see these rivalries intensify, with African governments playing external patrons off against each other, a dangerous game that has already destabilised Sudan, where a Saudi-UAE rivalry overlaps with Russian Wagner Group interests and Iranian outreach to the paramilitary Rapid Support Forces.

The report also warns of humanitarian fallout. “The crisis could raise humanitarian delivery costs to Sudan and Somalia, worsening conditions in the Horn of Africa.” And donor priorities may shift: “Military spending and crisis response closer to the conflict zone” could crowd out already constrained development financing for Africa.

That is a polite way of saying that Western donors, who have already been scaling back aid to Africa, will divert even more resources to the Middle East.

Read also: Iran war halts expected lowering of borrowing rates in Africa

Policy options amid the war in Iran

The AfDB, together with the UN Development Programme (UNDP), the UN Economic Commission for Africa (UNECA), and the African Union (AU), has sketched a three-horizon policy response: short-term shock absorption, medium-term resilience, and long-term strategic autonomy.

Short-term (immediate): Activate contingency import financing, including pooled fuel procurement and emergency food corridors. Diversify fertiliser sourcing where logistically feasible. Deploy temporary, targeted social protection measures, but avoid broad-based price subsidies, which “could entrench fiscal risk.” International financial institutions should provide rapid budget support, trade finance facilities, and policy-triggered liquidity.

Oil and gas exporters, Nigeria, Angola, Libya, Algeria, are told to save their windfalls. “Net oil and gas exporting countries should save excess revenues during times of price boom into sovereign wealth funds or other revenue buffers for productive investments to cushion against the inevitable post-war price correction.”

Inevitable? The AfDB assumes the conflict will end. But its own scenarios suggest a prolonged war would be catastrophic.

Medium-term (resilience): Expand African refining, storage, and distribution systems while accelerating renewable energy deployment to reduce import dependence. Protect fiscal space through domestic resource mobilisation.

Accelerate the African Continental Free Trade Area (AfCFTA) to strengthen regional supply chains. Build African financial safety nets, crisis facilities, debt-service swaps, and deeper capital markets.

Long-term (strategic autonomy): The AU should champion a Continental Crisis and Resilience Compact, built on energy and food security, financial safety nets, and strategic trade autonomy. This includes operationalising the African Financial Stability Mechanism (AFSM), a long-discussed but never-implemented facility for reserve pooling and liquidity backstops.

And, in what may be the most ambitious, or naive, recommendation: “Strengthen Africa’s collective geopolitical agency by reinforcing AU and regional mechanisms for unity, peace and security, advancing a common foreign-policy voice, and upholding multilateralism, international law, and peaceful dispute resolution as the basis for Africa’s engagement in global crises.”

That is a noble aspiration. But the reality is that Africa’s 54 nations rarely agree on anything, and external powers have become expert at divide-and-rule.

Economic shocks: Has Africa learned anything?

A decade ago, after the 2014 oil crash, African policymakers vowed to diversify away from commodity dependence. Five years ago, after Covid-19 economic fallout, they promised to build fiscal buffers. Three years ago, after the Russia-Ukraine war, they swore to secure food and fertiliser supply chains.

Yet here we are again: 29 currencies collapsing, fertiliser arriving late, and the continent begging for the International Monetary Fund (IMF) support that will come with strings attached.

The AfDB’s report is honest about this failure. It calls for “accelerating the reform of Africa’s financial architecture” and “deepening collaboration among African financial institutions.” It cannot force governments to stop borrowing in dollars, or to invest in storage instead of palaces, or to resolve the contradictions of the CFA franc system.

What the report does, quietly but powerfully, is to name the structural vulnerability that no one wants to discuss: Africa remains a price-taker, not a price-maker. It imports inflation. It exports raw commodities. And when the world catches fire, African households burn first.

The question for 2026 is not whether the Middle East conflict will hurt Africa. It already has. The question is whether this shock, like the seven before it, will be met with temporary palliatives and forgotten once oil prices fall, or whether it will finally force a rethink of what “sovereignty” means in a world where 29 currencies can be broken by a war 2,000 miles away.

Read also: How a war in Iran is rewriting Africa’s Gulf-reliant energy security rulebook

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