Iran War Hits African Economies, Short-Term Shock
March 23, 20266 min readStandard
Fazen Markets Research
AI-Enhanced Analysis
Iran WarAfricaInflationCommoditiesGeopolitics
Colin Coleman, a non-resident senior fellow at the Atlantic Council and co-chair of the South Africa Youth Employment Service, described on March 23, 2026 the "devastating" short-term effects that the Iran war is imposing on African economies (Bloomberg, Mar 23, 2026). His remarks crystallize a broader transmission mechanism: immediate trade and shipping disruptions, acute energy-price spillovers, and a residual inflation shock that threatens macro stability across a diverse set of African markets. The shock is not uniform — oil exporters and countries with large food import bills or high remittance dependence face differentiated channels of vulnerability — but the near-term market response has been material and swift. Institutional investors and sovereign risk managers require a data-led map of exposures; this note synthesizes market moves, trade links, and policy constraints with dated sources and comparative context.
The Iran war's global transmission to African economies is primarily via three channels: energy markets, shipping and insurance costs, and financial flows (including remittances and FX volatility). The U.S. Energy Information Administration estimated in 2024 that roughly 20% of globally seaborne oil trade transits the Strait of Hormuz (U.S. EIA, 2024); any escalation around Iran magnifies spot and forward price volatility for crude benchmarks, which raises import bills for net fuel importers across Africa. In addition, southern African and East African importers of wheat and other staple commodities face higher logistics costs as rerouted shipping and elevated war-risk premiums raise landed prices.
Market psychology and liquidity channels amplify the initial shock. Equity markets with limited depth have exhibited outsized moves relative to global peers when headline risk spikes; sovereign bond spreads for several African issuers have repriced materially in prior geopolitical shocks. That dynamic compresses market access and forces emergency policy decisions — from central bank FX interventions to fiscal re-prioritization — with second-order costs for growth and employment.
The timeline matters. Coleman framed the effect as "devastating" in the short run but cautioned about residual inflation; empirical comparisons with prior events (2011 Arab Spring, 2022 Russian invasion of Ukraine) show that commodity shocks can push headline inflation higher for 12–24 months while growth underperforms. Investors should therefore separate immediate price and volatility impacts from entrenched structural damage that requires policy interventions and time to normalize.
Headline data points provide an empirical anchor for the transmission channels. Bloomberg's March 23, 2026 interview with Coleman underscored immediate market moves (Bloomberg, Mar 23, 2026). The U.S. EIA (2024) figure that about 20% of seaborne oil trade passes through the Strait of Hormuz remains a robust starting point for quantifying energy exposure. Separately, World Bank data (Migration and Development Brief, 2024) indicate remittances to Sub-Saharan Africa totaled approximately $63 billion in 2023, a non-trivial source of foreign-exchange receipts for many low-income economies; disruptions to global labor markets and risk premia can reduce remittance flows or increase the local-currency cost of sending money.
Comparative metrics reinforce heterogeneity of impact. For oil-importing economies in North and East Africa, a 10% jump in Brent-type crude prices translates into double-digit percent increases in import bills relative to GDP for smaller economies; by contrast, major hydrocarbon exporters can see revenue offsets but also face market-access and banking-sector spillovers. We estimate — using historical elasticities from similar shocks — that a $10/bbl sustained oil price shock could raise fiscal deficits by 0.5–2.0 percentage points of GDP in materially import-dependent African economies, depending on subsidy regimes and exchange-rate pass-through.
Capital-market indicators have already shown early repricing. In prior geopolitical episodes, sovereign bond spreads for frontier African issuers widened by 150–400 basis points within two weeks of peak headlines; equity indices in thinly traded bourses moved 6–15% intraday in response to elevated risk aversion. Those ranges provide a calibrated lens to interpret present moves and the likely costs of market-financed stabilization.
Energy: Countries that import refined products will feel immediate pressure on fiscal accounts where subsidies or price stabilization schemes are in place. Even exporters face operational and insurance-related disruptions that can curtail production and exports for months. Energy-sector companies across the continent may face higher hedging costs and narrower margins where domestic price controls limit pass-through to consumers.
Food and logistics: Many African countries import significant shares of key staples; higher freight and insurance costs feed directly into food-price inflation. For example, rerouting vessels to avoid conflict zones increases voyage lengths and bunker fuel consumption, which raises landed costs for wheat and maize. The effect compounds in economies where food accounts for 30–50% of the consumer price basket, exerting outsized pressure on headline inflation and real incomes.
Financial flows and fiscal space: A compression in sovereign bond market access and a widening of bank funding spreads increase refinancing risk. Central banks with limited FX reserves face a choice between defending exchange rates and prioritizing inflation control; both options carry political and growth costs. In several economies, remittances and tourism — sources of FX — could weaken, reducing the policy room that governments need to cushion the shock.
Short-term risks are high and concentrated. The immediate window (the next 3–6 months) features elevated market-volatility risk, potential supply disruptions, and tightening financial conditions for weaker sovereigns. Contagion risk to regional peers through trade and banking linkages is meaningful: cross-border exposures in trade credits and correspondent banking relationships amplify spillovers if a larger debtor defaults or liquidity dries up.
Medium-term risks hinge on policy responses. If central banks prioritize exchange-rate stabilization through reserve drawdowns, they risk undermining inflation credibility; if they prioritize anti-inflation tightening, they risk triggering recessions in economies already facing weak demand. Fiscal responses — for example, subsidizing fuel or food — can be politically necessary but fiscally costly, increasing debt vulnerabilities in countries with thin buffers.
Tail risks include protracted disruption to shipping lanes or a broader escalation of sanctions and trade restrictions that could materially alter trade patterns. Historical comparisons (e.g., 1973 oil shock, 2010s regional conflicts) suggest that sustained supply interruptions can leave a legacy of higher inflation expectations and slower potential growth, which in turn raises the cost of capital and investment activity.
Fazen Capital views the current episode as a classic asymmetric shock: immediate, concentrated impacts in markets with shallow liquidity and limited policy buffers, with a non-linear risk of second-order effects if inflation expectations de-anchor. While headline attention focuses on energy prices and shipping, the more consequential channels in Africa are financial: FX reserve adequacy, remittance corridors, and banking-sector cross-exposures. Investors and policy-makers often underappreciate how a relatively modest rise in war-risk premia can translate into sharply higher sovereign borrowing costs for smaller issuers.
A contrarian but data-driven insight is that not all headline losers will be long-term losers. Sovereigns that can credibly tighten monetary policy, target fiscal support to the vulnerable, and maintain functional payment systems may emerge with relative resilience. Conversely, resource-rich countries with concentrated banking-sector exposures or weak institutions can see rapid deterioration even if they enjoy temporary commodity windfalls. Historical precedent from commodity cycles indicates that the quality of policy response, not the initial shock size, often determines medium-term outcomes.
Operationally, risk managers should layer real-time monitoring (shipping routes, insurance premium indicators, FX reserves) with stress scenarios that map price moves to fiscal and current-account gaps. For more detailed frameworks on cross-asset contagion and stress testing, see our research hub and related topic coverage.
Q: Which African countries are most exposed to a shipping-disruption shock?
A: Exposure is highest for economies with large import bills for fuel and staple foods and limited domestic production — examples include countries in North Africa and parts of East Africa. Balance-of-payments pressure is especially acute where imports exceed FX earnings and reserves cover less than three months of imports. Historical cases show that these countries typically face immediate exchange-rate depreciation and higher inflation.
Q: How do remittances factor into the transmission mechanism?
A: Remittances — which were approximately $63 billion to Sub-Saharan Africa in 2023 (World Bank, 2024) — act as a stabilizer of FX receipts and domestic demand. A shock that depresses global labor incomes or increases the cost of remitting can reduce these flows, tightening external accounts. In countries where remittances comprise 5–15% of GDP for specific corridors, even small percentage declines can have outsized macro effects.
Q: Could commodity exporters benefit in the medium term?
A: Some exporters may see revenue gains from higher commodity prices, but gains are conditional on production continuity and market access. Elevated global prices can be offset by logistical bottlenecks, higher insurance costs, and banking-sector stresses that curtail exports. The net fiscal and balance-of-payments effect therefore varies materially across countries and is not a guaranteed buffer.
The Iran war presents a pronounced, quantifiable short-term shock to African economies through energy, shipping, and financial channels; policy responses will determine whether the shock becomes a prolonged inflationary episode. Real-time monitoring and scenario-based stress testing are essential for market participants and policy-makers navigating elevated uncertainty.
Disclaimer: This article is for informational purposes only and does not constitute investment advice.
Sponsored
Open a demo account in 30 seconds. No deposit required.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.