U.S.-Iran Conflict: How it Could Affect Nigeria’s Economy, the Naira, Stock Market

U.S. President Donald Trump authorised strikes on Iran in the early hours of February 28, 2028, saying the country posed a threat to American interests.

Trump pointed to Iran’s history of internal repression, its backing of armed groups across the region, and claims that Tehran is covertly pursuing a nuclear weapons programme. He has also openly pushed for regime change in the country.

In response, Iran has launched attacks on U.S.-linked targets across parts of the Middle East, including the UAE, Bahrain, Qatar, Kuwait and Israel. It is also reportedly directing threats toward Saudi Arabia, Jordan and Iraq, all of which hold strategic importance and host significant U.S. interests.

For Nigeria, it could quickly become a story about oil, rising prices, the value of the naira, and the performance of the stock market.

Crude Oil: The First and Most Direct Link

The most immediate connection is crude oil. Global oil prices have already risen sharply as traders react to the risk of serious disruption in the Gulf region, especially around the Strait of Hormuz. This narrow waterway carries roughly one-fifth of the world’s daily oil supply. 

Brent crude climbed above $82 a barrel before pulling back, and analysts have warned that prices could reach $90 or even $100 if the conflict continues or shipping through the region remains affected.

For Nigeria, this creates an unusual mix of good news and bad news. On the surface, higher oil prices should help. Nigeria earns more money from exports when crude prices rise. Stronger oil earnings can improve government finances, build up foreign reserves, and give policymakers more room to work with. 

This is particularly important at a time when the country is trying to maintain recent economic progress and turn improved stability into stronger growth.

Nigeria’s economy grew by 4.07 per cent in the fourth quarter of 2025 compared to the same period the year before, with the oil sector growing by 6.79 per cent. Officials have been counting on higher oil output and a more stable foreign exchange market to support growth in 2026.

However, this only works if Nigeria can actually produce and sell enough crude oil to capitalise on the higher prices. This is where the good news runs into a familiar problem. Scheduled oil loadings for four major Nigerian crude grades in March were only around 793,000 barrels per day, which was lower than in February. 

Nigeria may enjoy better prices, but production limitations could reduce how much of that benefit it actually receives. Higher prices help, but they do not solve the underlying problem of producing too little oil.

The Naira: A More Complicated Picture

The impact on the naira is more complicated. In theory, stronger oil prices should support the local currency by bringing in more dollars and strengthening the country’s foreign reserves.

That has already been part of the recent story. Earlier this year, the naira was supported by better foreign exchange supply, stronger oil earnings, and interest from foreign investors attracted by high local returns. At that time, the currency was trading at around 1,364 per dollar, and analysts expected it to remain relatively stable as long as inflows continued.

But oil price increases driven by conflict do not always benefit oil-exporting countries right away. If the situation worsens, global investors may move their money into safer assets and away from markets like Nigeria. 

This shift can hurt Nigeria even when oil prices are going up. A clear example came from India, where the rupee fell and stock prices dropped as higher oil prices and weaker investor confidence hit the market. Nigeria could face a similar situation if foreign investors begin to pull back, especially since the country still relies heavily on capital flows that depend on investor confidence.

Inflation: The Biggest Domestic Risk

Inflation may be the most serious risk for ordinary Nigerians. Nigeria may benefit from higher crude prices as an oil producer, but Nigerian households pay the price on the other side through higher energy costs. If oil prices stay high, the cost of petrol, diesel, transport, and the movement of goods could all rise again. 

Nigeria’s annual inflation rate had slowed to 15.10 per cent in January, raising hopes that the central bank might be able to cut interest rates. A new oil price shock could reverse that progress by pushing prices higher through fuel and supply chain costs.

This has direct consequences for monetary policy. A central bank that had been hoping for a smoother path to lower inflation may now need to remain cautious for longer. If inflation rises again because of external factors, cutting interest rates becomes much harder to justify. 

That would affect the cost of borrowing, business confidence, and consumer spending across the economy. It also means that even if Nigeria earns more from oil exports, many households and businesses outside the oil sector could still feel worse off.

The Stock Market: A Split Outcome Is Likely

The stock market will likely reflect this divided picture. In the short term, higher oil prices could improve sentiment around energy companies and stocks that are seen as benefiting from stronger government revenue or improved foreign reserves. However, the broader Nigerian market could become more unstable if the global move away from risk assets intensifies. 

The latest developments in the Middle East have already pushed global stock markets lower, while oil and gold prices rose. This is a clear sign that investors are moving into protection mode. When that happens, markets tend to react badly to uncertainty before sorting out who the real winners are.

For Nigerian stocks, different sectors are likely to move in different directions. Oil and gas companies may attract fresh interest, but consumer goods firms, industrial companies, businesses that depend heavily on transport, and banks with exposure to weaker consumer demand could face more difficult conditions if fuel costs rise again. 

Foreign investors, who have recently been drawn to Nigeria by high returns and improving economic conditions, may also become more careful if the conflict turns into a long-running global risk event.

Trade, Logistics, and Supply Chains

There is also an important trade and logistics angle to consider. Tanker traffic through the Strait of Hormuz has already been disrupted, with shipping companies pausing operations and many vessels affected. 

Buyers in Asia are looking for alternative sources of supply and building up their stockpiles. If these disruptions continue, the costs of shipping, insurance, and delivery times could all worsen. 

Nigeria imports a large share of its refined fuel, industrial materials, and consumer goods. Any prolonged disruption to global supply chains would eventually push up prices and increase costs for businesses operating in the country.

What This Means in Plain Terms

Nigeria stands to gain from higher oil prices, but only to a degree. The government may see some improvement in revenue. Foreign reserves could receive support. The naira could benefit if oil earnings rise and investor confidence holds. 

But those potential gains come with serious risks: higher fuel costs, renewed inflation, less appetite among global investors for Nigerian assets, and possible instability in the stock market.

This is not a simple good news story for an oil-producing nation. It is a test of how well Nigeria can manage competing pressures. If the conflict remains limited and oil prices remain high without triggering a full global supply crisis, Nigeria may end up with a stronger fiscal position and a more stable currency. 

But if the conflict expands, shipping disruptions continue, and investors turn sharply away from risk, the country could find itself in a difficult position. Higher oil income on one side, but higher inflation, weaker capital flows, and a less stable stock market on the other.