Global tensions squeeze Ugandan economy as fuel, fertilizer prices rise

As the United States and Iran pursue diplomatic efforts to ease tensions in the Middle East, economists are warning that the conflict is already creating economic strain across the world, including in Uganda, through rising fuel prices and disruptions in global supply chains.

Speaking during a recent webinar organised by Uganda Development Bank, Joseph Mawejje, a senior economist at the World Bank, said the ongoing instability around the Strait of Hormuz has exposed the vulnerability of economies that depend heavily on imported commodities.

“When a single global route, such as the Strait of Hormuz, carries the commodities that power economies, disruptions far away can still show up in everyday prices at home,” Mawejje said.

He noted that about 50 per cent of the world’s seaborne sulfur trade passes through the Strait of Hormuz, alongside 34 per cent of global oil trade, 39 per cent of liquefied petroleum gas, 19 per cent of liquefied natural gas, about 20 per cent of refined oil products, 13 per cent of chemicals including fertilizers, and nearly 10 per cent of metals such as aluminium.

Mawejje described the Strait of Hormuz as one of the world’s most critical trade corridors, warning that increasing military tensions and naval disruptions in the Gulf region continue to threaten the smooth flow of energy and industrial commodities.

According to Mawejje, the Middle East accounts for approximately 34 per cent of global crude oil trade, equivalent to nearly 20 million barrels per day, in addition to around 127 billion cubic metres of liquefied natural gas annually.

He added that more than 60 million metric tonnes of fertilizers and raw materials move through or originate from the region every year, representing between 30 and 45 per cent of global urea and ammonia exports, as well as about 26 per cent of global phosphate exports.

“These figures highlight how instability in this critical maritime corridor can significantly interrupt global supply chains, particularly in energy and agricultural inputs, with far-reaching consequences for global markets,” he said.

Mawejje explained that disruptions in the Gulf region do not only affect energy markets, but also influence fertilizer availability, industrial production costs and food systems globally.

“For economies like Uganda, which rely on imported fuel, fertilizers and industrial commodities, such disruptions can filter through into transport costs, agricultural input prices and the cost of doing business,” he said.

He further observed that the current closure and disruption risks around the Strait of Hormuz have contributed to one of the largest oil supply shocks in modern history, surpassing the scale of earlier crises such as the Iranian Revolution, the Arab oil embargo, the invasion of Kuwait, the Iran-Iraq war, the Iraq war and the Libyan civil war.

“The shocks have inevitably extended beyond oil markets, affecting the supply and pricing of other key commodities. Given the Strait’s critical role in global energy flows, the result is a wave of adjustments across global markets, contributing to broader increases in commodity prices and heightened economic uncertainty,” Mawejje added.

The impact is already being felt in Uganda through rising fuel prices. Petrol currently averages between Shs 6,000 and Shs 6,500 per litre, while diesel ranges between Shs 5,200 and Shs 6,105 depending on location and fuel station. In the Kampala metropolitan area, petrol prices generally range between Shs 5,500 and Shs 6,000 per litre.

Dr Francis Mwesigye, chief economist at Uganda Development Bank, said the crisis demonstrates how interconnected the global economy has become, with developments in one region quickly affecting markets and livelihoods elsewhere.

“While this war is very far from the Ugandan perspective in the Middle East, its implications, especially if you live in an interconnected and interdependent world, mean that whatever happens in one part of the world can significantly affect another,” Mwesigye said.

He called on commodity-dependent economies such as Uganda to diversify their energy sources and strengthen long-term economic planning to reduce vulnerability to geopolitical shocks.

Mwesigye noted that the effects of global economic disruptions are often uneven across sectors, depending on market access, production structures and supply chain efficiency.

He pointed to Uganda’s tea sector as one of the industries already facing pressure due to disruptions in fertilizer supply chains.

“The tea sector demonstrates how global disruptions can quickly translate into local production and export challenges. As a crop that is highly dependent on productivity-enhancing inputs such as fertilizer, even small shifts in global supply chains can influence output levels, cost structures and overall competitiveness,” he said.

Mwesigye explained that Uganda imports much of its fertilizer from Gulf countries such as Saudi Arabia and Qatar, making the sector vulnerable to disruptions in the region.

“The tea sub-sector has been struggling with low prices and weak demand. Just as it begins to recover, it is hit again by external shocks, including constrained access to critical inputs like fertilizer, which are essential for productivity,” he added.

The discussion also explored how Uganda should position itself amid prolonged global uncertainty and geopolitical tensions.

Mawejje observed that Uganda’s anticipated transition into an oil-exporting country places greater emphasis on how future oil revenues will be managed to support sustainable economic transformation.

He stressed that effective management of the expected oil windfall will be critical in ensuring that short-term gains are translated into long-term economic value and resilience.

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