Iran war weakens Uganda’s economic prospects

As the US and Iran try to find a diplomatic end to the war in the Middle East, which has resulted in harsh economic realities for the global economy, at a recent webinar organized by Uganda Development Bank, Joseph Mawejje, a senior economist with the World Bank, highlighted the economic impact the war has had, resulting in pinching the pockets of Ugandans in day-to-day life living.

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.

Consider the following: 50 per cent of the world’s seaborne trade in sulfur passes through the Strait of Hormuz. The same applies to 34 per cent of oil trade, 39 per cent of liquefied petroleum gas, 19 per cent of liquefied natural gas, around 20 percent of refined oil products, 13 per cent of chemicals, including fertilizers, and nearly 10 percent of metals such as aluminum, Mawejje noted.

He further described the Strait of Hormuz as a vital artery for global trade, noting that “the waterway has increasingly been affected by military tensions in the Middle East, including naval blockades that have disrupted the flow of key commodities.”

Mawejje observed that the region accounts for about 34 per cent of global crude oil trade, equivalent to roughly 20 million barrels per day, alongside approximately 127 billion cubic meters of liquefied natural gas (LNG).

In addition, over 60 million metric tons of fertilizers and raw materials are transported annually through or from the region. 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.

“The Strait of Hormuz, therefore, functions as a critical choke point of the global economy. Any interruption of commodity exports from the Gulf region does not stay confined to energy markets; it transmits into fertilizer availability, fuel prices, and the cost of industrial inputs that ultimately influence production costs and food systems.

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,” Mawejje further added.

“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 explained.

Notably, the effects of the conflict are already being felt in Uganda through increasing fuel prices. Petrol prices currently average between Shs 6,000 and Shs 6,300 per liter, while diesel ranges from Shs 6,200 to Shs 6,500 depending on the location and fuel station.

Speaking during the webinar, Dr. Francis Mwesigye, the Chief Economist at Uganda Development Bank, highlighted how the interconnectedness of the global economy means that developments in one region can quickly influence markets worldwide.

“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,” he noted.

Dr Mwesigye pointed out that economic pressures rarely affect all parts of an economy in the same way. Their impact is often shaped by structural factors such as access to markets and the efficiency of distribution systems.

“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. A significant share of global fertilizer supply originates from the Gulf region, with Uganda relying on imports from countries such as Saudi Arabia and Qatar for key inputs like urea,” Mwesigye notes.

As a result, disruptions that affect global supply or pricing can have direct implications for input availability and production costs within the sector. The tea sub-sector has been struggling with low prices and weak demand for a number of years. The recent slight

The post Iran war weakens Uganda’s economic prospects appeared first on The Observer.

المصدر: The Observer (Uganda)