Middle East Conflict Shakes Kenya’s Economy as Exports Fall and Fuel Costs Loom
The escalating Middle East conflict in March 2026 is straining Kenya’s economy. Consequently, exports are shrinking while energy costs threaten to surge.
Export Crisis Hits Meat, Tea, and Flowers
- Meat Trade Nearly Collapses
Kenya’s lucrative Gulf meat market has sharply declined. Previously, the country earned about $2.3 million weekly from exports. However, volumes have now dropped below 5% during the peak Ramadan season.
Moreover, exporters now rely on costly cargo charters. Air freight costs have risen from $1.50 to $3.50 per kilogram. As a result, traders face shrinking profit margins and reduced competitiveness.
- Tea and Horticulture Disruptions
At the same time, tea exports face major setbacks. Iran, a key buyer, imported 13 million kilograms in 2024. However, ongoing tensions have disrupted trade routes and demand.
Similarly, flower exports to the United Arab Emirates are declining. Closed airspaces and canceled orders continue to hurt Kenyan growers.
Fuel Prices Signal Looming Inflation
- Stable Prices Mask Future Increases
Currently, fuel prices in Nairobi remain stable. Energy and Petroleum Regulatory Authority set petrol at KSh 178.28 and diesel at KSh 166.54.
However, these prices reflect earlier shipments. Meanwhile, diesel landing costs have already increased by 8.46%. Therefore, consumers should expect higher fuel prices in the next cycle.
- Strait of Hormuz Risk
An image of a ship attack in the Strait of Hormuz. Photo/ Navy Lookout
Furthermore, instability around the Strait of Hormuz raises global concerns. If disruptions persist, crude oil prices could hit $140 per barrel. Consequently, Kenya may experience severe inflation and rising living costs.
Shilling Stability Faces Growing Pressure
- Currency Holds, But Risks Remain
So far, the Kenyan shilling remains relatively stable. It currently trades near KSh 129.30 against the US dollar.
However, the Institute of Economic Affairs warns of potential depreciation. If the conflict persists, the shilling could weaken by up to 30%. As a result, the exchange rate may approach KSh 168 per dollar.
- Debt Burden Could Increase
A weaker shilling would raise external debt servicing costs. Therefore, Kenya’s fiscal pressure could intensify in the coming months.
READ ALSO: Global Oil Prices Surge After Ras Tanura Strike
Supply Chain Disruptions Slow Key Sectors
- Flight Suspensions Affect Trade
Kenya Airways has suspended flights to major Gulf hubs. These include Dubai and Sharjah due to security risks.
As a result, exporters face logistical challenges and delivery delays.
- Import Shortages Threaten Production
Meanwhile, manufacturers risk shortages of critical raw materials. These include petrochemicals and fertilizers such as urea.
Consequently, the upcoming planting season could face delays. This disruption may further weaken Kenya’s agricultural output.
Outlook: Economic Uncertainty Ahead
Overall, the Middle East conflict is disrupting Kenya’s trade, energy, and currency stability. Therefore, prolonged tensions could significantly slow economic growth.
Policymakers must act swiftly to cushion businesses and consumers.
