Zambia is not insulated from the escalating conflict in the Middle East, and the first shockwaves are likely to be felt at the fuel pump and in the cost of living, economist Kelvin Chisanga has warned.
The confrontation between the United States and Iran has intensified into a direct and large-scale war following joint US-Israeli military strikes targeting Iran’s nuclear facilities and ballistic missile production sites. The strikes reportedly led to the death of Iran’s Supreme Leader, Ali Khamenei, along with other senior officials.
According to the US Department of War, more than 1,250 targets were hit within the first few days of the conflict. In retaliation, Iran has launched missile and drone attacks on US and allied installations in Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, further destabilising a region central to global energy supply. Analysts project that the war could stretch on for weeks.
Chisanga said the crisis has rattled a region that controls a vital oil corridor responsible for supplying nearly a third of the world’s crude oil, making price shocks almost inevitable for fuel-importing countries such as Zambia.
“The Middle East has a very important corridor which supplies about 30 percent of oil to the global market. Once that supply is threatened, the global market reacts immediately,” Chisanga said.
He noted that Zambia had only just begun to experience marginal relief after recent fuel pricing reviews by the Energy Regulation Board, gains that are now at risk of being erased by global instability.
Fuel prices have recorded consecutive reductions over the past two months, largely supported by a strengthening Kwacha. Petrol dropped from K29.92 in January to K27.88 in February and currently stands at K26.61. Diesel prices have also eased, falling from K25.11 in January to K24.50 in February and now retailing at K23.25.
However, Chisanga cautioned that these improvements may be short-lived if global oil prices surge.
“Whatever gains we have made through the fuel pricing review will not work in our favour if we start receiving sharp changes in the global fuel price structure,” he said.
He warned that fuel is one of the most aggressive drivers of inflation, with direct spillover effects on food prices, transport costs and overall production expenses.
“In February alone, fuel contributed about 0.3 percent to inflation. Once fuel prices start rising again, the spillover effect will be felt across the entire economy,” Chisanga said.
Even positive developments such as firm copper prices and relative stability in the foreign exchange market may not be enough to counteract fuel-driven inflationary pressure, he added.
The economist further cautioned that the exchange rate could come under strain, as higher fuel import costs increase demand for foreign currency.
“Once fuel costs go up, the fundamentals on the forex market begin to respond in the same pattern, because fuel is a key input into both production and consumption,” he explained.
On household welfare, Chisanga painted a worrying picture, warning that the cost of living could rise further if the conflict escalates. He recalled that a fuel price increase in December was sufficient to reverse a downward inflation trend, demonstrating how sensitive Zambia’s economy is to changes in energy prices.
Looking ahead, Chisanga said Zambia’s policy space to cushion households and businesses remains limited. He pointed to the country’s international reserves, currently estimated at about US$5.5 billion, as one of the few available buffers, but stressed that this alone may not be adequate.
“The only key instrument we currently have is the reserve position, but that on its own is not enough to shield the economy from sustained global shocks,” he said.
He urged authorities to urgently explore alternative fuel supply routes and diversify sourcing options in order to reduce exposure to external disruptions.
“We need to look at alternative sources of supply, including opening up regional markets such as Angola, so that we avoid facing a severe fuel situation in the country,” Chisanga said.
With the Middle East conflict showing no immediate signs of easing, Chisanga warned that Zambia must brace for more challenging economic conditions, as rising fuel prices threaten to undermine growth, exchange rate stability and household incomes once again.
