For finance ministers and investors in Africa, 2026 has been a year of expensive oil. When Iran declared the Strait of Hormuz closed on 2 March, following an escalation of war with the United States and Israel, it shut a route that had carried about 20% of the world’s daily oil supply. The International Energy Agency’s executive director said the closure and attacks on energy facilities cut global oil supply by about 11 million barrels a day, more than double the shortfalls of the 1970s oil crises.
How the shock reached Africa
Little African oil passes through the strait, but importers pay world prices. Within weeks, fuel prices more than doubled in Somalia and South Africa braced for diesel increases of at least 50%. In Kenya, fuel stocks became a political issue in April, when reported stocks of super petrol covered only about 16 days, and the Fuel Stabilization Fund was used to cushion pump prices. LPG import costs for cooking rose by around 90% in East Africa.
For fuel importers, the shock works through several channels at once: a larger import bill, pressure on foreign exchange reserves and currencies, higher transport and food prices, and fiscal costs when governments subsidise fuel.
The transition as a hedge
The same shock has strengthened the financial case for renewables, electrified transport and clean cooking that does not depend on imported fuel:
- Avoided imports. Every kilowatt-hour from domestic solar, wind, hydro or geothermal is fuel that does not have to be bought in dollars.
- Price stability. Renewable projects have most of their costs up front. Once built, their output is not exposed to oil markets, which makes them valuable for utilities and businesses seeking predictable costs.
- Faster payback for distributed solar. Businesses using diesel generators have seen payback periods for solar-plus-storage shorten as fuel costs rose. Chinese solar exports hit a record in March, with analysts linking part of the surge to higher fossil fuel prices.
What it means for capital allocation
Investors assessing African energy projects now have a clearer way to value energy security. Lenders financing fuel-intensive assets face higher risk of stranded or loss-making operations when prices spike. Governments facing subsidy bills have a fiscal reason to redirect support toward measures that reduce fuel demand permanently. The transition was already a climate imperative. 2026 has made it a balance-of-payments one.
Sources: Kenyans.co.ke: Strait of Hormuz closure and fuel rationing fears · The Standard: Oil shock looms · Ecofin Agency: Hormuz supply shock pushes up fuel prices across Africa · Mongabay: China solar exports hit record
