BLACK GOLD, BROKEN CHAINS
How the 2026 Oil Price Shock Is Reshaping the Global Economy, And Why Ethiopia Is at a Crossroads?
By the Banks Ethiopia Research Desk • Published: 1 April 2026
| BRENT CRUDE
$107.72 /bbl ▲ +0.31% (31 Mar 2026) |
WTI CRUDE
$103.87 /bbl ▲ +0.96% (31 Mar 2026) |
YR-AGO BRENT
~$72 /bbl +49% YTD surge (2026) |
Live crude oil benchmarks — source: Fortune / Investing.com / EIA, as of 31 March – 1 April 2026
The world is paying a steep price for war. Since the United States and Israel launched joint air strikes on Iran on 28 February 2026, global crude oil markets have undergone one of the most violent supply shocks in modern history. Iran’s retaliatory closure of the Strait of Hormuz — the narrow maritime chokepoint through which roughly one-fifth of all global oil and 20 percent of liquefied natural gas normally transits — has sent Brent crude soaring past $107 per barrel, up nearly 50 percent from the same period one year ago. For wealthy, energy-secure nations, the pain is felt at the pump. For developing economies like Ethiopia, the consequences are existential.
The IEA’s March 2026 Oil Market Report characterised the disruption as the largest supply shock in the history of the global oil market, eclipsing even the Arab embargo of 1973. Gulf countries have collectively cut total oil production by at least 10 million barrels per day. Emergency reserves are being released. Governments from Manila to Ljubljana are imposing fuel rationing. And in Addis Ababa, long queues have formed at fuel stations as Ethiopia’s Petroleum and Energy Authority (PEA) scrambles to manage a crisis it did not create but cannot escape.
“The war in the Middle East is creating the largest supply disruption in the history of the global oil market.” — IEA Oil Market Report, March 2026
THE ECONOMIST | Which Country Is the Biggest Loser from the Energy Shock?
In a widely cited analysis, The Economist examined which emerging markets face the greatest vulnerability to macroeconomic crisis from the energy shock. The verdict was unambiguous: when global energy supply is squeezed, the poorest nations suffer most. The report found that countries combining high oil-import dependence, thin foreign exchange reserves, and fragile fiscal positions face the gravest risks — a cluster that places Bangladesh, Pakistan, Sri Lanka, Egypt, Ethiopia, Kenya, and Tunisia among the most exposed economies on earth. For sub-Saharan Africa, the danger is not merely rising prices but true physical shortages — a distinction that separates wealthier nations, which can absorb higher costs, from developing economies that may simply run out.
THE PRICE SURGE: FROM $71 TO $107 IN FIVE WEEKS
The trajectory of oil prices in 2026 has been breathtaking in its speed. Brent crude opened the year at roughly $82.80 per barrel in January, with markets cautiously optimistic about Chinese demand recovery and stable OPEC+ production. By late January, prices had briefly dipped to $64 per barrel as US-Iran negotiations in Oman appeared to gain traction. That calm did not last.
The US-Israeli attack on Iran on 28 February changed everything. By 5 March, Brent had jumped 3–4 percent in a single day to $85. On 9 March, it crossed $110 for the first time since the 2022 Ukraine war energy shock. Throughout March, prices seesawed between $100 and $120, reaching an intraday high of $115.35 on 30 March. As of 31 March, Brent was trading at $107.72 per barrel and WTI at $103.87 — levels last seen in July 2022. Goldman Sachs estimates a geopolitical risk premium of $14–$18 per barrel is now embedded in prices, driven by three specific fears: the Strait of Hormuz closure, disruption to Saudi and Qatari infrastructure, and Iran’s new yuan-denominated ‘toll booth’ system that allows only Chinese and Russian-aligned vessels to transit freely.
The EIA projects Brent will remain above $95 per barrel for at least the next two months, before potentially falling below $80 in Q3 2026 — a forecast described by analysts as optimistic. JPMorgan’s head of commodities research has warned that if the Strait does not reopen, paper futures will ultimately re-price to match the physical reality of constrained supply, pushing prices still higher.
WHO BEARS THE HEAVIEST BURDEN? A GLOBAL SNAPSHOT
According to analysis by Al Jazeera and Zero Carbon Analytics, at least 85 countries have reported fuel price increases following the Iran war. The most acute pressures are concentrated in Asia, where roughly 80–84 percent of crude oil flowing through the Strait of Hormuz is destined.
Nomura has identified Thailand, India, South Korea, and the Philippines as among Asia’s most vulnerable economies, due to extreme import dependence. Japan and South Korea are in the ‘critical’ tier: Japan sources 95 percent of its oil from the Gulf; South Korea, 70 percent. Japan instructed its oil reserve sites to prepare for emergency releases on 8 March. South Korea, the following day, imposed a maximum retail price cap on petrol and diesel — the first such intervention in nearly 30 years.
South Asia faces an even more acute crisis because its financial buffers are thinner. Qatar and the UAE account for 99 percent of Pakistan’s LNG imports, 72 percent of Bangladesh’s, and 53 percent of India’s, according to Kpler data. Bangladesh has shuttered universities, declared Wednesdays a public holiday, and introduced fuel rationing capping private motorists at 15 litres per week. Pakistan has moved to a four-day government work week and closed schools. Myanmar has implemented an odd-even vehicle rationing system. Vietnam has tapped its price stabilisation fund and urged citizens to cycle and carpool.
In Europe, the EU’s direct dependence on Gulf oil is lower — around 8 percent of crude imports — but diesel and jet fuel exposure is more significant. The EU estimates oil prices have risen 50 percent and gas prices 70 percent since the war began, adding an extra €13 billion to its fossil fuel import bill. Slovenia became the first EU member state to impose formal fuel rationing, limiting private motorists to 50 litres per day. Austria cut fuel taxes and capped retailer margins. Hungary and Italy reduced excise duties. The G7 leaders issued a joint statement on 30 March pledging to take ‘any necessary measures’ to stabilise markets.
In sub-Saharan Africa, the picture is grimmer still. Nations already in debt distress — including Egypt, Kenya, Ghana, and the Cote d’Ivoire — are experiencing both rising bond spreads and above-median debt repayment obligations in 2026, according to the Boston University Global Development Policy Center. In Egypt, the government has introduced emergency anti-profiteering courts under military jurisdiction to prosecute fuel price-gougers. In Kenya, rural fuel stocks are already running out. South Sudan, despite having some of East Africa’s largest oil reserves, generates 96 percent of its electricity from oil and has begun rotating blackouts in Juba.
| Country | Gulf Oil Dep. | Risk Level | Key Policy Response |
|---|---|---|---|
| Japan | 95% | Critical | Emergency reserves released; subsidy programs |
| South Korea | 70% | Critical | First fuel price cap in 30 years imposed |
| Bangladesh | 72% | Severe | Fuel rationing: 15 L/wk; Wednesdays off |
| Pakistan | 99% | Severe | 4-day work week; schools closed |
| Sri Lanka | ~25% | Severe | Fuel rationing; schools 4-day week |
| Philippines | 60-95% | High | 4-day government work week |
| Myanmar | High | High | Odd-even vehicle rationing system |
| Vietnam | High | High | Work from home; fuel stabilisation fund |
| Egypt | High | High | Emergency directives; anti-price-gouging courts |
| Kenya | Moderate | Moderate | 21 days of reserves; rural shortages reported |
| Ethiopia | 100% | High | PEA directive; EV push; fuel prioritization |
| Slovenia (EU) | Moderate | Moderate | First EU nation to implement fuel rationing |
Selected country responses to the 2026 oil price shock. Sources: Al Jazeera, IEA, TIME, CNBC, UN News, Reuters, Pulse Nigeria.
ETHIOPIA AT THE CROSSROADS: PRESSURE, POLICY, AND POTENTIAL
For Ethiopia, the 2026 oil shock is not merely a financial inconvenience — it is a compound systems shock striking simultaneously across fuel supply, food security, foreign exchange, transport logistics, and inflation. The country imports 100 percent of its refined petroleum products, sourcing the vast majority from the UAE, Saudi Arabia, and Kuwait — all Gulf states whose export routes now pass through the Strait of Hormuz, which is disrupted or closed.
The National Bank of Ethiopia (NBE) placed the headline inflation rate at 9.7 percent in February 2026, citing progress from tight monetary policies. But its Monetary Policy Committee has since issued an urgent warning: the Iran war and Strait of Hormuz closure ‘will exert upward pressure on global oil prices and will create disruptions in supply chains; thereby posing increased upside risks to the domestic inflation outlook.’ The Committee is set to reconvene in late April to evaluate whether emergency rate action is required.
More than 90 percent of Ethiopian trade flows through the Port of Djibouti, whose fuel terminals are tightly integrated into Gulf supply chains. Any upstream disruption translates, almost without delay, into downstream shortages. According to Ethiopia’s Institute for Foreign Affairs (IFA), oil price volatility of the scale currently underway directly worsens the country’s trade deficit, depletes scarce foreign exchange reserves, and elevates the cost of food, fertiliser, and manufactured imports simultaneously. The IFA notes that fertiliser — roughly 30 percent of whose global trade transits Hormuz — is already surging in price, threatening crop yields and amplifying food insecurity.
“For a landlocked and energy-dependent country like Ethiopia, these shocks are not abstract geopolitical events — they are immediate, far-reaching economic jolts.” — IFA Policy Brief, March 2026
Fuel station operators in Addis Ababa began reporting shortages by mid-March, with long vehicle queues forming at outlets across the city. Some stations are temporarily closed. In rural areas, the crisis has been more severe: bus drivers report that petrol station operators are hoarding fuel and selling it on black markets at inflated prices, pushing up transport costs and, by extension, food prices in communities far from major urban centres.
Fuel prices at Ethiopian pumps have been revised sharply upward. Checks at stations in Addis Ababa’s Summit area in mid-March showed motorists paying 132.18 birr per litre for petrol and 139.84 birr per litre for diesel — significant increases compared to February 2018 benchmark prices of 129.12 birr per litre recorded for both fuel types. The government has simultaneously introduced fuel subsidies to partially shield lower-income users while adjusting import-cost pricing.
ETHIOPIA’S EMERGENCY RESPONSE: DIRECTIVE, RATIONING, AND THE EV PIVOT
The Ethiopian government has moved on multiple fronts simultaneously. On 17 March 2026, the Petroleum and Energy Authority (PEA) issued a nationwide emergency directive requiring all oil companies and retail fuel stations to operate in a ‘high-conservation mode.’ Director General Destaw Mekuanent declared fuel a strategic national resource to be managed as such until global supply conditions normalise.
The directive establishes a strict fuel prioritisation hierarchy. Security establishments and critical state infrastructure come first. Manufacturing industries, large-scale agricultural operations, and essential consumer goods producers follow. Export-oriented companies engaged in international trade are also prioritised, given their role in generating the foreign exchange Ethiopia needs to fund future fuel imports. Public transport vehicles are prioritised at filling stations, and refuelling is permitted only into a vehicle’s original tank — with strict bans on dispensing into containers or barrels, and legal penalties for stations found engaging in black-market activities or price manipulation. Regional trade bureaus have been tasked with oversight of tanker arrival schedules and fuel usage compliance.
The Ethio Engineering Group — a major state enterprise with more than 3,000 employees — has mandated virtual meetings in place of vehicle travel, compulsory carpooling for necessary field duties, restriction of vehicle use to standard working days, and cuts to fuel allowances for senior management.
Prime Minister Abiy Ahmed added his voice directly. In a message posted to his social media platform X on 16 March, he called on all Ethiopians to prioritise ‘essential needs’ and use fuel sparingly until conditions stabilise, also appealing to distributors and fuel stations to manage limited supplies responsibly. ‘I urge all of us to use fuel with a sense of responsibility,’ he wrote.
The following day, the Ministry of Transport and Logistics issued a national call to accelerate the transition to electric vehicles (EVs) and natural gas-powered vehicles as a critical structural buffer against future shocks. It stressed the need to ‘intentionally cultivate the use of electric vehicles as a national culture.’
ETHIOPIA’S ELECTRIC VEHICLE TRANSFORMATION: A MODEL FOR RESILIENCE
Ethiopia’s EV strategy predates the current crisis — and it may be what saves the country from its worst effects. In 2024, Ethiopia formally banned the import of fossil-fuel-powered vehicles and introduced tiered tariff incentives to encourage the mass adoption of electric mobility: import duties were reduced to 15 percent for fully built EVs, 5 percent for semi-assembled units, and zero percent for completely knocked-down kits assembled locally. The VAT structure was also adjusted to make EVs more cost-competitive than petrol and diesel alternatives.
The results have been dramatic. The number of electric vehicles on Ethiopian roads has surged from roughly 7,000 in 2022 to over 115,000 as of 2026 — one of the fastest EV adoption trajectories in any developing economy. Analysts at Fana Media Corporation described it as a transition that has attracted attention well beyond Africa. The policy is underpinned by Ethiopia’s substantial renewable electricity capacity, most notably the Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile, which has made the country less electricity-constrained than many of its peers. Every EV operating on Ethiopian roads runs on domestically generated hydroelectric power — and therefore requires zero imported petroleum.
Energy expert Moges Mekonnen of Ethiopian Electric Power told Xinhua that the scale of the EV shift means the crisis, while serious, may not be as ‘severe’ for Ethiopia as it would have been even three years ago. ‘Large numbers of electric-powered cars are being driven in major cities in Ethiopia, and unlike before, several industries in the country use electric power to operate,’ he said. He described the crisis as a ‘wake-up call for African governments to focus on the adoption of electric vehicles and look for alternative energy sources, mainly renewables.’
Ethiopia’s IFA Policy Brief frames the long-term challenge clearly: the country cannot reopen the Strait of Hormuz, harden Gulf LNG terminals, or stabilise global insurance markets. But it can reduce the share of its economy that depends on those systems working without interruption. That means building petroleum buffers, accelerating oil-substituting electrification, investing in clean cooking and solar irrigation, and strengthening coordination across procurement, agriculture, and macroeconomic management. ‘The most effective energy strategy,’ the brief concludes, ‘is not to guess when the next Gulf shock will come — it is to build an economy that is less damaged when it does.’
“Ethiopia has an advantage many do not: a largely renewable electricity base. Every electric vehicle on the road today is one less vehicle queuing for imported fuel tomorrow.” — Capital Ethiopia, March 2026
OUTLOOK: RESOLUTION OR PROLONGED DISRUPTION?
The Trump administration has set an April 6, 2026, deadline for Iran to reopen the Strait of Hormuz, threatening military action if it does not. Iran’s Foreign Minister has declared that ‘no negotiations have happened with the enemy until now, and we do not plan on any.’ Iran has begun operating a yuan-denominated toll system at the Strait, allowing Chinese and Russian-allied vessels to transit freely while collecting fees — a de-dollarisation tool that adds a geopolitical dimension to what was already a supply crisis.
The IEA has activated its emergency architecture for the sixth time in history, releasing 400 million barrels of emergency oil stocks collectively from member nations — enough to compensate for roughly 20 days of Hormuz flows at pre-war rates, but inadequate for a sustained closure. OPEC+ has confirmed it has no plans to increase output before Q3 2026. The ECB has postponed planned interest rate cuts, raised its 2026 inflation forecast, and cut GDP growth projections. Nobel Prize-winning economist Philippe Aghion has warned that if Brent exceeds $150, the world faces a scenario approaching the severity of the 1973 oil embargo — with inflation, stagflation, and recession risks converging.
For Ethiopia and other oil-dependent developing nations, the message is clear: the era of cheap, reliable Gulf oil is not merely temporarily disrupted — it may be structurally repriced. The countries that have already begun the energy transition will be better placed to weather what comes next. For those who have not, the stress tests are just beginning.