Middle East War: How countries are responding to oil price shock & what Nigeria must do

The ongoing war that the United States and Israel are waging on Iran has sent shockwaves across global energy markets, with far-reaching consequences for economies worldwide.

African countries are not exempt. Despite being far removed from the war zone, even major oil producers like Nigeria are grappling with the fallout from surging crude prices following Iran’s closure of the Strait of Hormuz — a critical route that accounts for about 20 per cent of global oil supply.

The disruption has pushed crude prices above $100 per barrel, exposing both oil-importing and oil-producing countries to economic strain.

According to the International Energy Agency (IEA), the conflict has triggered one of the largest supply disruptions in the history of global oil markets. Oil flows through the Strait have dropped sharply from about 20 million barrels per day before the war to almost zero.

At the same time, Gulf producers have cut output by at least 10 million barrels per day, worsening supply shortages and forcing countries to scramble for alternatives.

Despite a coordinated release of 400 million barrels from emergency reserves by IEA member countries last month, global oil prices have remained high.

Nigeria’s reality

Since the outbreak of the war on 28 February, petrol prices in Nigeria have risen sharply, mirroring global crude price trends. Consumers are already feeling the effects of the supply shock caused by the conflict.

Petrol prices have risen by more than 25 per cent across major cities, worsening the cost-of-living crisis many Nigerians have faced since the removal of fuel subsidy in 2023.

Retail prices, which averaged about N870 per litre before the escalation, now hover around N1,361 and above per litre in many parts of the country.

Data from the Global Petrol Prices show that Nigeria’s petrol price averaged N1,270 per litre ($0.916) as of 30 March, compared to the global average of N1,989.99 per litre over the same period.

A review of the data indicates that petrol is sold at higher prices in Nigeria than in several African countries, including Ethiopia ($0.842), Niger ($0.875), Tunisia ($0.862), Egypt ($0.44), Sudan ($0.70), Algeria ($0.353), Angola ($0.327), and Libya ($0.023), despite Nigeria being the continent’s largest oil producer.

The data further show that Libya has the lowest petrol price per litre, followed by Iran ($0.029).

Similarly, petrol prices in countries such as Saudi Arabia, Oman, Russia, Belarus, Indonesia, Bahrain, Azerbaijan, the United Arab Emirates, and Guyana are lower than in Nigeria.

The Dangote Refinery — a key supplier of refined products in Nigeria and neighbouring countries — has adjusted its petrol gantry prices multiple times, resulting in an estimated 30 per cent increase overall.

These adjustments have often resulted in higher pump prices nationwide, worsening inflationary pressures and raising transportation costs.

In response, the federal government has accelerated the rollout of Compressed Natural Gas (CNG) vehicle conversion kits as a cheaper alternative to petrol.

Officials have also emphasised the strategic importance of strengthening domestic refining capacity to reduce dependence on imports. However, critics argue that the impacts of such actions are long-term and they have no immediate impact on Nigerians grappling with the increase in prices of goods and services.

Nigeria’s Minister of Foreign Affairs, Yusuf Tuggar, said the crisis highlights the need for global energy diversification and positions Nigeria as a potential partner to Gulf producers during supply disruptions.

Increased Revenues; domestic pains

As a major oil-producing country, analysts are optimistic that the surge in oil prices could significantly boost Nigeria’s revenue as a major crude oil exporter.

Higher prices are also expected to strengthen the country’s Foreign Exchange (FX) reserves and support fiscal consolidation.

With Brent crude trading above $100 per barrel compared to Nigeria’s 2026 budget benchmark of $64.85, the federal government is likely to record substantial revenue gains.

Stephen Onyeiwu, a professor of economics, described the conflict as “bad news” for Nigeria, warning that higher oil revenues may not offset rising import costs and inflation.

In a recent analysis, the professor explained that the oil price hike will raise production costs in many sectors of the global economy and that this will affect Nigeria.

He said before the US and Israel launched attacks on Iran on 28 February, global inflation had been declining, from a peak of 8.7 per cent in 2022 to less than 4 per cent early in 2026.

“But the world now faces the risk of another era of inflation. As Nigeria depends on imports, Nigerians should expect to pay more for goods and services, especially if the war persists,” he said.

Mr Onyeiwu said Nigeria will surely benefit from the oil price surge (oil windfalls). However, he expressed concern that Nigeria lacks effective institutional frameworks for channelling oil windfalls into productive investments, citing the 1991 instance when Nigeria benefited heavily from oil windfalls after the US attacked Iraq.

At the time, Nigeria earned about $12 billion in oil windfalls, but due to a lack of transparency and accountability, many Nigerians are unaware of how much the government realised at the time and how it was spent.

Analysts have also argued that some spending from the Excess Crude Account is expedient, as the funds are sometimes used to cover budget deficits rather than to invest in critical capital projects that benefit citizens. There is also evidence that corruption eats into it and that it’s used to finance the ostentatious lifestyles of top government officials and political elites.

“Ordinary Nigerians rarely benefit directly from oil windfalls,” Mr Onyeiwu argued, explaining that the funds would have a greater impact if they were used to resuscitate the country’s moribund manufacturing sector, or invested in Nigeria’s crumbling infrastructure and educational and health facilities.

How countries are responding

As the crisis deepens, governments across the world are deploying a mix of fiscal, regulatory and energy policies to cushion the impact on citizens.

Several African countries have introduced emergency measures to stabilise fuel prices and protect households.

Ethiopia has rolled out targeted fuel subsidies, while others are implementing price caps to limit volatility.

Countries like Tanzania are releasing strategic fuel reserves to stabilise supply, while Nigeria is prioritising crude supply to domestic refineries.

ALSO READ: US/Israel-Iran War: Heating oil prices skyrocket in UK, govt intervenes

There is also a broader push across the continent to promote alternative energy sources, particularly CNG, as a more affordable option. Some governments are considering transport subsidies to prevent sharp increases in public transport fares.

In Europe, countries such as the United Kingdom and the Netherlands have retained earlier fuel tax cuts to keep pump prices relatively low.

In Asia, Bangladesh has imposed daily limits on fuel purchases to curb panic buying, while China has restricted fuel exports to secure domestic supply.

Indonesia has committed billions of dollars to energy subsidies to maintain stable electricity and fuel prices. Meanwhile, South Korea and Hungary have introduced price caps on petrol and diesel.

Some countries are also adjusting biofuel blending requirements to reduce overall fuel costs.

Experts warn of lasting impact.

Economists say the disruption could have long-term consequences, particularly for African economies.

Ibrahima Thiam, a researcher at Université de Thiès in Senegal, noted that rising oil prices will increase energy costs, transport fares and fiscal pressures across the continent.

“Against the common assumption that rising oil prices automatically benefit producing countries, the reality is far more complex,” he said in a note to The Conversation.

He added that about 40 out of Africa’s 54 countries rely heavily on imported hydrocarbons, making them especially vulnerable.

Tsegay Tekleselassie, a visiting lecturer at Wellesley College, said the crisis underscores the need for countries to transition to more resilient, diversified energy systems.

What options does Nigeria have?

Experts say Nigeria must adopt targeted and sustainable measures rather than reverting to costly fuel subsidies.

Razaq Fatai, head of Research and Advisory at Vestance, advised against reinstating blanket subsidies, citing past inefficiencies, fiscal strain and smuggling.

Instead, he recommended: Sustaining crude supply to domestic refineries to reduce import dependence, and providing targeted cash support to vulnerable households.

Mr Fatai also suggested expanding mass transit systems to lower commuting costs, encouraging remote work where possible and reducing logistics bottlenecks and import-related taxes on essential goods.

He noted that such measures would cushion citizens from immediate shocks without reopening a subsidy regime that has historically failed.

As the Middle East conflict continues to disrupt global oil markets, countries are increasingly turning to a mix of short-term relief measures and long-term energy strategies.

For Nigeria, the challenge lies in balancing immediate economic pressures with structural reforms that reduce vulnerability to external shocks.