Middle East Crisis Drives Oil Prices Higher, Weakening African Currencies

African currencies have weakened significantly due to the ongoing Middle East crisis, which has driven oil prices higher and accelerated inflation across the continent. At least 27 African currencies have depreciated since January this year, with some experiencing a decline of over 17% in value.

The Libyan dinar has fallen by more than 17%, while the Ghanaian cedi has dropped by over 10%. The crisis is attributed to the surge in crude oil prices triggered by the closure and disruption of the Strait of Hormuz, through which approximately 20% of globally traded crude oil flows.

The increase in oil prices has led to higher import costs for African nations, most of which rely on the Middle East for 80% of their imported oil and 50% of refined products. This forces African central banks and governments to spend more foreign currency to purchase fuel, putting downward pressure on local currencies against the strengthening US dollar as investors flee perceived risk.

Foreign investors have been selling off African assets and retreating to dollar safety since the conflict escalated in late February this year, when the United States and Israel launched military strikes against Iran. The inflation impact is severe, with an average inflation rate of 10.4% projected for 2026 across Africa.