Middle East war clouds Africa's recovery, S&P warns
Africa's nascent economic recovery faces its most serious external test in years as the conflict in the Middle East pushes up oil prices and borrowing costs across the continent, credit rating agency S&P Global Ratings has warned.
In an assessment of 25 rated African sovereigns, S&P said the fighting had driven Brent crude prices up by 50% since the start of 2026, a shock that is rippling through import bills, inflation expectations, and government finances from Cairo to Kigali.
"The rise in the cost of imported energy will weaken most African sovereigns' regional balances of payments," S&P said, adding that the pressure could force some governments to reintroduce fuel subsidies they only recently abolished, undoing years of difficult fiscal reform.
The agency said it now assumes an average Brent price of US$85 per barrel for the remainder of 2026.
S&P's outlook for African sovereign credit had been broadly positive at the start of the year, following two years of net ratings improvements across the region. That optimism has now been tempered.
Who is most at risk?
S&P identified Egypt, Mozambique, and Rwanda as the three most exposed sovereigns, pointing to their heavy dependence on energy and fertiliser imports, large external financing needs, and limited foreign-currency reserves.
Senegal, Egypt, and Uganda were singled out as particularly vulnerable because of their large current account and fiscal deficits. Angola, meanwhile, was flagged as a significant outlier on fuel subsidies, with direct subsidy spending equivalent to 2.8% of gross domestic product (GDP), far above the continental average of 0.3%.
By contrast, S&P said Congo-Brazzaville, Botswana, and Morocco, along with net oil exporters Nigeria and Angola, were either less exposed to the shock or entered the conflict with stronger external buffers.
Nigeria could stand to benefit more than other exporters, S&P said, because of its growing domestic refining capacity, a reference to the Dangote refinery's increasing contribution to local fuel supply.
A cascade of pressures
Beyond the direct hit from higher energy costs, S&P warned of a series of knock-on effects that could compound the damage.
Rising fertiliser prices, linked to energy costs, threaten to reduce domestic food production and strain household budgets for an extended period. Supply chain disruptions are already forcing adjustments to trade routes, affecting both imports and exports, including shipments of gold and diamonds that transit the Middle East.
The agency also warned that second-round inflation effects would increase demand for foreign currency, placing exchange rates under pressure and driving up domestic borrowing costs. "Domestic interest rates could increase from multi-year lows following a period of more favourable inflationary trends," S&P said.
A continent already stretched
The warning arrives at a difficult moment for African public finances. S&P said rated African sovereigns currently allocate approximately 17% of government revenues to interest payments, more than three times the global median of 5.5%. After accounting for wage bills, governments have little room left to cushion the shock through spending.
S&P said fiscal consolidation had been easing the debt pressures left by the Covid-19 pandemic and the global interest rate spike of 2022–2023. But it cautioned that spending pressures were now likely to increase as governments respond to higher fuel prices, and that recent subsidy reforms, particularly in Nigeria and Egypt, could come under political pressure to reverse.
Some resilience, but risks remain
Not all the news is bleak. S&P noted that roughly half of rated African sovereigns held stronger foreign-currency reserves at the end of 2025 than their decade-long averages, giving them some capacity to absorb the initial shock.
The agency also pointed to bright spots: sovereigns with deep local capital markets; South Africa, Morocco, and Egypt, have more diverse financing options, while countries positioned along rerouted global shipping lanes could benefit from increased port activity.
S&P's base case assumes the conflict will peak and that the Strait of Hormuz, a critical chokepoint for global oil flows, will gradually reopen. But it cautioned that a resumption of full-scale hostilities, or a prolonged disruption to Middle Eastern oil production, would present a significantly greater threat to African economies.
"The resumption of hostilities and a more prolonged conflict would present a greater threat to many African sovereigns, as they would globally," S&P said.
