As military confrontations intensify between the United States and Israel against Iran, experts caution that the ramifications may extend well beyond the Middle East, affecting global oil markets and inflation rates, which could have dire consequences for countries like Nigeria.
Recent missile strikes by Israel and the US targeted Iran, occurring shortly after negotiations on Tehran’s nuclear ambitions. This is reminiscent of previous instances when military actions disrupted dialogues between the concerned nations.
The immediate results of this renewed conflict are becoming evident in global energy markets, with Brent crude prices increasing by 3.66 percent, reaching approximately $73 per barrel.
Concerns over the strategic Strait of Hormuz, a critical route for global oil transport, have been raised. The consequences of potential disruptions in this area will likely impact many oil-dependent nations, with Nigeria being a primary example.
The Nigerian government has urged all parties involved to cease military operations and return to negotiation.
With the conflict affecting shipments through the Strait of Hormuz, many oil companies have apparently halted their operations in this crucial waterway.
"Our fleet is immobilized for several days now," a senior official from a trading firm disclosed to Reuters.
Daily, approximately 20 million barrels of crude oil transit through this narrow waterway, which is essential for exports from key oil-producing countries such as Saudi Arabia, Iraq, and Iran. Any disturbance or even the prospect of one typically triggers spikes in oil prices and increases shipping insurance expenses.
Though Saudi Arabia and the UAE have alternative pipelines that bypass the Strait, experts note these routes cannot handle the entirety of the oil typically transported through that corridor.
Historically, oil markets have shown extreme sensitivity to regional conflicts; for instance, during the Gulf War, Brent crude prices surged from around $15 per barrel in July 1990 to over $40 by October, following Iraq’s invasion of Kuwait. In contrast, during the Iraq War in 2003, prices spiked before normalizing once supply fears diminished.
Since January, when tensions between the US and Iran heightened, oil markets have experienced significant fluctuations.
For Nigeria, with Brent crude surpassing the 2026 budget benchmark of $64.85, increased oil prices could enhance oil revenue, bolster foreign reserves, and elevate cash inflows into the Federation Account. This scenario has the potential to augment allocations from the FAAC to both federal and state governments.
However, these advantages may be countered by existing economic challenges.
Despite being the largest oil producer in Africa, Nigeria still relies on imports for part of its refined petroleum products. These imported goods, including petrol and jet fuel, are vulnerable to price volatility, which is likely to intensify as global crude prices rise.
Furthermore, Nigeria's major operational refinery also imports a substantial portion of its crude oil.
Reportedly, by mid-2025, the Dangote Refinery was bringing in 9 to 10 million barrels of crude each month to maintain operations amid supply challenges. An increase in crude prices is likely to elevate the costs of petrol and other refined products produced domestically.
Should global crude prices continue to rise, the costs of refined products – including fuel and diesel – may increase within Nigeria, exacerbating inflation and heightening the cost-of-living crisis.
Increased shipping and insurance expenses will further contribute to higher prices for imported goods, affecting transportation, food distribution, and overall household expenditures.
Regarding air travel, global mobility is already being disrupted. Reports indicate many international airlines have ceased or changed their flight routes to and across the Middle East due to safety issues.
Following the escalation in military actions, US President Donald Trump confirmed the initiation of "major combat operations" in Iran, prompting Iranian forces to retaliate against US and Israeli interests in the region.
Air traffic in numerous nations has experienced temporary closures, leaving travelers stranded and compelling airlines to opt for longer, more expensive flight paths.
For Nigerians, this situation may lead to hikes in airfare, travel delays, and uncertainty. Those organizing religious trips, including the lesser Hajj in Ramadan, may encounter interruptions.
Students and professionals in affected regions might also face mobility complications.
Security analysts have raised alarms about possible internal security problems as well.
The Islamic Movement in Nigeria (IMN), which is aligned with Iran, has historically staged demonstrations supporting Iran, particularly in cities like Abuja and Kaduna. During protests, slogans denouncing America and Israel are often chanted, even in absence of direct conflict.
Given the ideological ties, US-Israeli military actions could provoke heightened emotions and tensions domestically. Past IMN protests in Nigerian cities have sometimes resulted in violent clashes, leading to injuries, arrests, and damage to property.
Security experts warn that if large gatherings are forcibly dispersed, it could escalate tensions and disrupt public order in affected urban areas.
Experts have weighed in on the situation, with Ridwan Olayemi, CEO of Vestance, noting that Nigeria could undergo significant economic shifts should tensions increase further.
“Iran’s strategic importance and the crucial role of the Strait of Hormuz in global oil logistics mean that any disruption poses risks to a large portion of the world’s oil supply and generally leads to rising crude prices,” he noted.
“For Nigeria, the effects could be twofold. Higher crude prices might enhance oil-related earnings and contribute to improved cash inflows into the Federation Account, depending on production levels and remittance performance,” he added.
However, he cautioned of considerable risks on the downside.
"Increased global oil prices may lead to rising domestic fuel and transport costs. Higher shipping and insurance fees can further escalate the prices of imported goods and the domestic distribution of goods, adding to inflationary pressures,” he expressed.
The Community Action for Food Security has also conveyed concerns regarding the secondary impacts of the conflict.
“Though Nigeria is not directly engaged in the current conflict, the indirect ramifications on energy costs, inflation, food security, and economic resilience are concerning. We advocate for ongoing peace efforts, renewed discussions, and international cooperation to protect developmental gains,” the organization addressed.
An unnamed economist focused on the intersection of oil production and humanitarian efforts in Dakar warned that prolonged hostilities could compromise tenuous economic stability throughout Africa.
“Should hostilities continue, crude oil prices will escalate. While this may appear advantageous for producers like Nigeria, it may destabilize economies such as Ghana,” the economist stated.
He highlighted that numerous African nations rely on imported refined products, suggesting that disruptions to trade routes and escalating shipping costs will likely translate into higher consumer prices and inflationary pressures.
He further cautioned that rising tensions would add to an already unstable global security landscape, potentially diverting funds from development to military spending and negatively affecting foreign investment in Africa.
Additionally, he warned about intensified competition for critical minerals essential for defense technologies, likely influencing investment and security narratives across the continent.
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