Iran war is tightening the Horn’s economy

Since the United States–Israel war against Iran began and has now entered its third week, the global economy has experienced significant instability. The conflict has disrupted major energy supply routes, particularly through the Strait of Hormuz, which carries nearly 20% of the world’s oil. As a result, global oil prices have surged, with fuel costs rising across many countries.

These rising fuel prices have triggered a chain reaction throughout the global economy, increasing transportation costs, production expenses, and ultimately the prices of essential goods such as food and basic commodities. Much of the Horn of Africa is now experiencing these shocks.

Last week in Mogadishu, Bajaj (auto rickshaw) drivers staged protests in response to the sharp increase in fuel prices, which have more than doubled in recent weeks — from approximately $0.65 per liter to about $1.50. The demonstrations took place on March 13–14, 2026, with drivers blocking major roads across the city to demand government intervention and relief from rising costs that are severely affecting their livelihoods.

In Ethiopia, the rise in fuel prices has also been strongly felt. On Wednesday last week, Ethiopia’s Finance Minister, Ahmed Shide, called on citizens to use fuel more sparingly, noting that further steps to reduce consumption are being considered. His remarks followed a government decision to raise domestic fuel prices effective March 11, 2026, alongside warnings that authorities have begun prosecuting individuals and entities accused of reselling subsidized fuel above regulated prices.

The adjustment, which raised the cost of diesel, gasoline, and kerosene, was described as necessary in response to rising global oil prices and supply challenges. The government also introduced a higher diesel price for large industrial consumers. Ahmed highlighted that Ethiopia spends over $4.2 billion annually on fuel imports and continues to provide significant subsidies despite pressure from currency fluctuations and global price increases. However, officials have expressed concern over illegal fuel diversion, stating that subsidized fuel is being resold unlawfully, and have pledged to intensify enforcement actions.

Prime Minister Abiy Ahmed has also urged Ethiopians to adopt careful and efficient fuel usage in response to growing disruptions in global energy supply. In a statement, he noted that countries reliant on imported fuel, including Ethiopia, are encountering increasing difficulty in securing sufficient supplies as the crisis continues. In addition, Abiy Ahmed called on all stakeholders — including fuel distributors, service stations, and consumers — to manage available resources responsibly.

In Kenya, the crisis has severely reduced meat exports to the region, particularly during the high-demand Ramadan period. Shipments have dropped to under 5% of usual levels, largely due to a sharp rise in air transport costs and reduced flight availability.

The Middle East remains Kenya’s primary export destination for meat, with the UAE historically taking the largest share. However, exporters are now sending only small quantities to cities such as Dubai and Abu Dhabi, while trade with other countries in the region has also been disrupted.

Export volumes have fallen drastically, from typical daily shipments of around 200 metric tons during Ramadan to as little as 5–15 tons. Weekly exports, usually valued at about $2.3 million, have also declined significantly. Since early March, expected export totals have not been met, with actual shipments far below projections.

A major factor behind this decline is the surge in air freight costs. Prices per kilogram have more than doubled or even tripled due to reduced airline operations and increased insurance expenses tied to the conflict. Exporters are now relying on expensive cargo charters, making business less viable. The disruption has had wider economic consequences across the supply chain. Slaughterhouses are struggling with excess stock, exporters are redirecting products to local markets at lower prices, and job cuts have been reported, with some facilities reducing casual workers by up to 80%.

If the situation continues beyond Ramadan, industry players fear further declines in demand and rising operational costs, which could threaten the sustainability of the sector.

In a lecture at Chatham House, Musalia Mudavadi, Kenya’s Prime Cabinet Secretary, said that the escalating conflict in the Middle East should “serve as a warning for African nations” to reassess their global role and strengthen their economic independence. He noted that the continent has long remained exposed to external shocks, such as disruptions in energy supplies and trade, which quickly impact local economies. Mudavadi said, Africa must shift away from overreliance on external systems and instead capitalize on its own strengths, including natural resources, a growing youth population, and expanding digital capacity. He further stresses the need for stronger regional cooperation and accelerated intra-African trade to build resilience against global instability. Mudavadi also cautions that international focus on Middle Eastern conflicts could reduce attention to Africa’s own security and humanitarian challenges.

Furthermore, African countries are highly exposed to the effects of the Middle East conflict because their farming systems depend on fertilizer shipped through the Strait of Hormuz. A significant portion of global fertilizer trade, about one-third, passes through this route, and disruptions have already driven prices higher. Countries in the region rely heavily on these imports, with around 54% of Sudan’s, 30% of Somalia’s, and 26% of Kenya’s fertilizer arriving via this channel.

These economic shocks are occurring at a time when the region is already struggling with multiple climate-induced crises. Severe drought has gripped Somalia, leaving millions of people in urgent need of humanitarian assistance. In response to the worsening situation, more than 70 non-governmental organizations (NGOs) issued an open letter to donors last week, calling for increased funding to address growing needs.

At the same time, parts of Ethiopia have been hit by devastating floods. In Ethiopia’s southern regions, flash floods have claimed the lives of over 120 people and displaced more than 10,000 others, further compounding the humanitarian crisis. Kenya and other countries across the wider region are also grappling with similar climate-related shocks, highlighting the scale and interconnectedness of these challenges.

These emerging economic pressures, stemming from the war in Iran and the disruption of vital trade routes, are expected to exacerbate an already fragile situation, placing millions more people at risk and deepening the region’s vulnerability.