The escalating conflict between Iran and Israel is casting a long economic shadow far beyond the Middle East, with Kenya already feeling the tremors. The war has triggered a three per cent surge in global oil prices, sparking fears of further hikes that could ripple through Kenya’s economy in the form of elevated fuel and commodity prices.
The conflict intensified after Yemen’s Houthi rebels, backed by Iran, declared their entry into the war following U.S. airstrikes on Iranian nuclear sites. The Houthis have vowed to attack Red Sea shipping routes key arteries for global trade further stoking fears of regional escalation and supply chain disruptions.
Iran, the third-largest oil producer in the Organisation of the Petroleum Exporting Countries (OPEC), churns out approximately 3.3 million barrels of crude oil daily. Even more critical is the Strait of Hormuz, through which up to 21 million barrels of oil pass each day. A disruption here could spell global oil shortages and skyrocketing prices, directly impacting Kenya’s fuel imports.
According to RBC Capital analyst Helima Croft, the likelihood of significant energy disruptions rises dramatically if Iran perceives an existential threat. Any further entanglement of the United States could provoke direct attacks on vital oil infrastructure and tanker routes.
Beyond energy, Kenya’s trade with Iran faces uncertainty. Iran is a significant market for Kenyan tea, with exports worth Sh5.98 billion in 2023. These exports were recently jeopardized by a ban triggered by a Sh168 billion scandal involving substandard tea shipments. Kenya had just entered talks to lift the ban before the conflict erupted.
In a bid to strengthen trade ties, Kenya and Iran signed an agreement in February to export 50 metric tonnes of beef. However, these plans are now at risk due to potential disruptions in supply chains and financial transactions, as Iran could face further isolation from global payment systems.
With rising oil prices inflating production and transport costs, Kenya’s agricultural sector especially maize and wheat imports could see increased prices, ultimately burdening consumers and threatening food security.
The war’s ripple effects underscore Kenya’s vulnerability to global geopolitical shocks and the urgent need for diversified trade and energy strategies.
