Middle East conflict rattles Zimbabwe’s economic stability

LIVINGSTONE MARUFU / CLOUDINE MATOLA Escalating conflict in the Middle East is sending fresh shockwaves through Zimbabwe’s economy, with surging global oil prices already driving up local fuel costs and raising fears that external shocks could erode the macroeconomic stability achieved over the past year years. The intensifying confrontation involving Iran, Israel and the United States has jolted global energy markets, triggering sharp increases in crude oil prices and igniting concern among policymakers, economists and business leaders that Zimbabwe could face renewed inflationary pressure and rising production costs. Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu, economists and industry executives warn that the unfolding geopolitical crisis could expose the country’s vulnerability to global commodity price shocks, particularly given the southern African country’s heavy reliance on imported fuel. Zimbabwe, a net importer of fuel, which is particularly exposed to global oil shocks, has already begun to feel the impact, with the Zimbabwe Energy Regulatory Authority (ZERA), increasing fuel prices, with diesel rising to US$1.77 per litre and petrol blend (E5) climbing to US$1.71 per litre. The new prices represent a 16.4% increase, driven largely by volatility in international oil markets. ZERA has since warned the next adjustment in two weeks’ time. ZERA acknowledged the upward movement in prices, attributing the increase to global market developments. Higher fuel costs are expected to ripple through the economy, raising transport expenses and increasing the cost of moving goods and people, developments likely to trigger price increases across a wide range of commodities. Fuel prices are a critical macroeconomic variable in Zimbabwe, given their strong correlation with inflation and overall economic performance. Rising fuel costs increase production expenses across sectors, including manufacturing, mining and agriculture. For consumers already grappling with high living costs, the latest increase is likely to further squeeze disposable incomes. Zimbabwe spent approximately US$1.8bn on fuel imports in 2025 and sustained high global prices could significantly inflate that bill. The surge in oil prices comes amid growing fears of disruption in the Strait of Hormuz, a narrow but strategically vital maritime corridor linking the Persian Gulf to the Gulf of Oman. The waterway handles roughly 20–25% of global oil and liquefied natural gas shipments, making it the most important energy chokepoint in the world. Iran has warned vessels against crossing the strait since hostilities escalated, prompting many shipping operators to avoid the route. As a result, Brent crude oil prices surged to about US$100 per barrel this week, up sharply from around US$69 per barrel earlier in the year. Any disruption in this corridor could severely constrain global oil supplies and send prices even higher. Chokepoints such as the Strait of Hormuz are narrow sea routes that are critical to global energy security. Even temporary disruptions can delay supply chains, raise shipping costs and drive-up energy prices worldwide. Multiple economists and business leaders told Business Times that the unfolding crisis could have serious implications for Zimbabwe’s economic outlook. Reserve Bank of Zimbabwe (RBZ) governor Dr John Mushayavanhu warned that the conflict could introduce new external shocks that threaten macroeconomic stability. "The conflict could be a threat to our macroeconomic stability that is why we could not rush to change the policy rate from 35%, imagine what could have happened if we have reduced the rates and the war comes. We were going to be forced to react again [to the effects of this conflict to increase interest rates] and this was going to have an effect on our credibility," Dr Mushayavanhu said. The Zimbabwe National Chamber of Commerce (ZNCC) president Tapiwa Karoro said escalating geopolitical tensions were already pushing international oil prices higher. “Zimbabwe is a net fuel importer, so higher global prices translate almost directly into higher import costs and pump prices,” Karoro said. Beyond fuel, he warned, global conflict typically drives investors away from emerging and frontier markets toward perceived safe havens. “This tightens access to external finance, raises the cost of capital and weakens currencies such as the Zimbabwe Gold through sentiment and expectations, even when domestic fundamentals remain unchanged,” he explained. Karoro said the war could also have significant trade implications. “Higher fuel and shipping costs increase the price of imports — including machinery, inputs and consumer goods — while simultaneously eroding export competitiveness due to higher logistics costs.” He identified three major macroeconomic risks: inflation, exchange rate pressure and fiscal strain. Fuel is a universal economic input, meaning that rising diesel and petrol prices quickly feed into transport costs, food prices, electricity generation and manufacturing. “Even if headline inflation is currently subdued, fuel shocks can quickly re-ignite cost-push inflation,” Karoro said. Higher fuel import bills also increase demand for foreign currency. “If export receipts do not rise at the same pace, this places pressure on the exchange rate and foreign currency reserves, testing the credibility of the stabilisation framework.” Government may also face difficult fiscal choices. “Authorities must decide whether to absorb the shock through subsidies or tax reductions, which would strain the budget or pass the full cost to consumers, which risks fuelling inflation and slowing growth,” Karoro added. Economist Tony Hawkins said the severity of the economic impact would largely depend on the duration and scale of the conflict. “…the effects of the war involving Iran, Israel and the United States are already being felt here,” Hawkins said. “The key immediate impact will be the price and availability of oil and gas.” He expects Zimbabwe’s inflation rate to rise in coming months, largely due to higher fuel prices and increased import costs. “Inland transport costs, shipping and insurance will all increase,” Hawkins said. Economist Vince Musewe warned that the conflict could trigger broader inflationary pressures. “The immediate impact is a hike in fuel prices and eventually liquefied gas. These increases reduce households’ disposable income and raise business operating costs,” Musewe said. “We are bound to see imported inflation creeping up.” The war could also undermine Zimbabwe’s growth outlook for 2026. “The cost of nearly everything will rise,” Musewe added. Zimbabwe Economics Society vice-president Misheck Ugaro said the country had limited short-term options to cushion itself from the external shock. “In the short term there is little we can do. But over the medium to long term, we must strengthen import substitution and diversify supply sources,” he said. Economist Eddie Cross described the recent fuel price spike as an early indication of the broader global economic consequences of the conflict. “This is a major development. It will increase the cost of everything we use and consume,” Cross said. Zimbabwe National Chamber of Commerce chief executive Christopher Mugaga said the country had already begun feeling the impact at the fuel pump. “If you look at oil’s contribution to total production costs, it is between 10% and 15%. That means price adjustments across the economy could fall within that range,” Mugaga said. He warned that the conflict could also disrupt Zimbabwe’s trade dynamics, particularly with the United Arab Emirates. Dubai has become one of Zimbabwe’s most important export markets, particularly for gold. In January alone, exports to Dubai reached US$500.1m, accounting for roughly half of the country’s total export earnings. Most of Zimbabwe’s gold, its largest export, passes through Dubai’s global trading hub before reaching final markets. Any disruption to flights, shipping, insurance or payment channels through the Gulf could slow this vital export pipeline. At the same time, rising gold prices could partly offset the negative effects. During global crises, investors typically move funds into safe-haven assets such as gold. Zimbabwe’s gold sector benefited from this trend in 2025, generating US$4.5bn in export earnings, nearly double the previous year. However, if logistical disruptions intensify, Zimbabwe may struggle to fully capitalise on higher prices. If geopolitical tensions persist, long-haul travel could become more expensive and risk-averse, reducing visitor flows through Middle Eastern hub airports. Emirates currently operates seven flights per week between Harare and Dubai, although the airline recently suspended some services before resuming limited operations. Beyond the immediate economic effects, analysts say the crisis underscores Zimbabwe’s vulnerability to external shocks.

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Middle East conflict rattles Zimbabwe’s economic stability

…Iran,Israel–US tensions ignite oil price surge, raising fresh inflation pressures

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