US v Iran Crisis: How It Could Affect Nigeria’s Economy

On February 28, 2026, the United States launched an attack on Iran under what it called Operation Epic Fury. The situation is still developing, but the economic channels are already clear. This matters for Nigeria not because the fighting is “far away,” but because global oil flows, shipping routes, and inflation don’t respect distance.

Two things make Iran central to this story. First, Iran is a major crude oil exporter. Second, Iran has operational control over the Strait of Hormuz, the narrow waterway linking the Persian Gulf to the Gulf of Oman and the Arabian Sea. 

Roughly 20% of the world’s seaborne petroleum liquids move through that corridor. After the strikes, the strait was officially closed. Once that happens, markets don’t wait for perfect clarity. They move fast, and they move prices.

What happens immediately: shipping gets expensive, energy gets pricier

The first shock is not even oil supply, t’s transport and risk. When a key maritime chokepoint closes, shipping becomes harder and insurance becomes more expensive. Tankers reroute, schedules break, and traders price in uncertainty. That pushes up the cost of getting crude from the Middle East to the rest of the world.

And because energy feeds into almost everything, transportation, manufacturing, electricity, and food production, higher energy costs quickly become higher inflation.

Why China matters in this crisis

Here’s a key link many Nigerians miss: China’s exposure.

In 2025, China bought about 80% (around 1.38 million barrels per day) of Iran’s seaborne crude, based on Kpler’s estimates. 

That represented roughly 13.4% of China’s total seaborne crude imports. If Iranian supply is disrupted or shipping through Hormuz is constrained, China’s import costs rise. When China’s costs rise, the global cost of finished goods rises too, because China sits at the center of global manufacturing.

So this crisis can create a double inflation effect:

1. oil and shipping costs rise, and
   
2. imported goods become more expensive globally.
   

Nigeria is not insulated from either.

Oil prices were already climbing, nthis adds fuel

Even before the strikes, the market had priced in risk. NYMEX Brent crude rose from $60.89 (Jan 5) to $73.84 (Feb 27, 2026). Once you move from “tension” to real military escalation and a closed chokepoint, the next move is usually higher oil prices, because traders start to worry about supply disruptions and delayed deliveries.

In simple terms: this crisis is the kind of event that can push oil higher quickly and keep it volatile.

What it means for Africa: inflation pressure and slower activity

Most large African economies, South Africa, Kenya, Ethiopia are net importers of energy. That means they pay more when oil rises. Higher energy prices show up as:

• more expensive transport and logistics,
  
• higher food import bills,
  
• higher local farming costs (because fertilizer and fuel rise),
  
• higher factory and processing costs.
  

When inflation rises, central banks often tighten policy or keep rates high for longer. Either way, growth slows. That is bad news for jobs, consumer spending, and business expansion across the continent.

There’s also a demand-side hit. If global inflation rises, consumers in rich countries cut back. Demand for “non-essential” finished goods slows, and that can reduce demand for raw materials used in those goods. 

Economies tied to export commodities used in consumer products, like Ghana and Côte d’Ivoire with cocoa can feel that squeeze if global demand weakens.

Countries building assembly-for-export businesses like Morocco and Tunisia also face higher energy input costs, which can reduce competitiveness.

Investment gets cautious when headlines get hot

Foreign direct investment (FDI) doesn’t like uncertainty. When geopolitical risks spike, investors delay decisions, reprice risk, and move funds into “safer” assets. That doesn’t mean investment disappears forever, but it often slows or shifts.

Countries attracting strong investor interest such as Kenya and South Africa could see deal timelines stretch, funding costs rise, or some commitments paused while markets assess the fallout.

The “winners” on the continent: oil exporters with spare capacity

Not every country loses equally. Higher oil prices can boost revenues for exporters, especially those that can deliver reliably when supply elsewhere is threatened.

Angola stands to gain more prominence as a reliable supplier to China. Libya can also benefit if it’s able to export steadily. In a world where Middle East supply routes are uncertain, buyers look for alternatives and stable exporters become more valuable.

Nigeria’s reality: we benefit from high oil prices, but we still pay the bill

Nigeria’s situation is complicated. On paper, higher oil prices sound like good news. More oil revenue can reduce the budget deficit, improve external buffers, and reduce borrowing pressure.

But Nigeria also faces a hard truth: we still import refined fuel and, in some cases, import crude for refining needs. So while crude oil prices rising can improve revenue, it can also make local energy costs more expensive.

And there’s another twist: Nigeria has committed significant volumes of future crude production through forward sale agreements.

Since 2018, the NNPC has executed multiple crude sale agreements totaling $21.56 billion across 11 deals, including Project Leopard and Project Gazelle II. These deals provided upfront liquidity, but they also committed future crude deliveries to lenders and counterparties.

That matters because it reduces flexibility. It makes it harder to fully implement the Domestic Crude Supply Obligation the way local refiners need it to work especially when global prices are high and obligations are already locked in.

What that means for Dangote, PMS prices, and inflation

If domestic crude supply is constrained by pre-existing commitments, then refiners like Dangote may still rely on importing crude or paying higher market-linked prices. And if Nigeria continues to import PMS to cover domestic needs, then higher global prices and higher shipping costs will raise the landing cost.

Now connect the final dot: Nigeria currently has no PMS subsidy in place.

So instead of the government absorbing the shock through subsidy spending, the shock can show up in the economy through:

• higher pump prices (or pressure for them to rise),
  
• higher transport fares,
  
• higher prices for food and everyday goods,
  
• weaker consumer spending.
  

This is classic inflation transmission: energy rises, transport rises, food rises, and household budgets tighten.

The key risks Nigerians should watch next

The next phase depends on three moving parts.

First is the status of the Strait of Hormuz. If it stays closed or remains risky, shipping costs stay high and oil stays elevated.

Second is how long oil prices remain above the levels Nigeria used for budgeting assumptions. A short spike is manageable. A long spike changes everything especially inflation.

Third is Nigeria’s supply reality: how quickly domestic refining and supply arrangements can reduce exposure to expensive imports.