By Anderson Ojwang
The ongoing Middle East war is likely to hurt the country’s economy and lead to a rise in the cost of living, a report by the Institute of Economic Affairs (IEA) has revealed.
The report says a successful blockage of the Persian Gulf would pose a severe threat to Kenya’s economic stability, primarily because the region is a critical source of essential energy imports and a significant market for Kenyan goods.
“The most salient risks and challenges Kenya would face: the most immediate and crippling impact would be on Kenya’s fuel supply due to the dependence on oil imports from countries situated in the immediate neighbourhood of the Persian Gulf,” it says.
Dependence on Gulf Petroleum
Kenya imports US$4.39 billion in refined petroleum, with its primary supplies for total imports coming from the United Arab Emirates (US$2.52B), Oman (US$532M), Kuwait (US$486M), and Saudi Arabia (US$423M).
A successful blockage or reduction in shipping activity and safety in the Persian Gulf would halt these shipments, with knock-on effects in the form of domestic fuel shortages and skyrocketing transport costs.
Secondary Export Loss
Interestingly, refined petroleum is also Kenya’s second-largest export at US$907M.
This suggests that Kenya acts as a regional distribution hub for imported petroleum. As a result, a supply cutoff would simultaneously endanger this significant revenue stream.
Category Value at Risk
Key Partner(s) Affected
Energy Imports — US$4.39 Billion — UAE, Oman, Kuwait, Saudi Arabia
Key Exports — US$979 Million — UAE, Saudi Arabia
Industrial Imports — US$6.01 Billion — China (via Indian Ocean lanes)
Beyond Fuel
Kenya relies on the Indian Ocean trade routes, and these are proximate to the Persian Gulf.
This trade route would be heavily destabilized by an extended conflict, with additional knock-on effects on imports and exports for Kenya.
Food Security
Kenya imported US$987M in palm oil, US$625M in wheat, and US$494M in rice.
Large portions of this domestic demand are supplied through imports, with food coming from Malaysia (US$1.09B) and India (US$2.54B).
Insecurity in sea lanes often leads to increased maritime insurance premiums and shipping reroutes that would make these staples more costly.
Manufacturing Inputs
Kenya’s industrial sector relies on US$452M of hot-rolled iron and US$557M of packaged medicaments.
China is Kenya’s largest import origin at US$6.01B for a variety of products. Regional instability affecting Indian Ocean shipping lanes would delay these vital supplies.
Trade
An extended conflict in the Persian Gulf would close the door on some of Kenya’s most lucrative trade partners.
As reported, retaliation by the Islamic Republic of Iran has made the UAE an unwilling party to the conflict.
The horizontal escalation of the conflict would delay the resumption of commercial shipping trade through the Persian Gulf with the following adverse consequences.
Collapse of Imports from UAE
The United Arab Emirates is Kenya’s third-largest export destination, accounting for US$754M in trade.
Kenya also exports US$225M worth of goods to Saudi Arabia.
An extended blockage would effectively cut off access to these markets for Kenyan agricultural produce such as tea (US$1.4B), cut flowers (US$780M), and tropical fruits (US$320M) annually.
Kenya’s Exports and Destinations
With a total import bill of US$23.6B against only US$8.74B in exports, Kenya already operates at a significant trade deficit.
The added costs of a regional conflict would likely trigger a severe currency devaluation and a balance-of-payments crisis.
Based on the profile of trade in 2024, an extended conflict in the Persian Gulf means Kenya would face an asymmetric risk in its imports compared to exports.
This is because exports are far more diversified, with greater demand being met through regional partners and through North American and European markets that are less affected by the conflict whose epicentre is the Persian Gulf.
On the other hand, Kenya’s largest imports are related to energy and food, and these are sourced from countries being drawn into the conflict through horizontal escalation. Additionally, food items such as palm oil require navigation of contiguous maritime routes whose risks are elevated.
Domestic industry and consumers would suffer immediately from the lack of fuel and raw materials once existing stocks are exhausted.
Kenya’s Balance of Payments
The current account tracks changes in the flows of goods and services and the difference between imports and exports. The result is called the balance of trade.
The capital account tracks flows of capital and the difference between inflows and outflows of capital.
The financial account tracks ownership of assets and liabilities.
Kenya makes both exports and imports to and from the Persian Gulf. A disruption of Kenyan exports and imports will affect both sides of the balance of trade.
In the year 2024, Kenya made exports of US$8.81 billion to the world. Of this, US$2.59 billion was exported to Asia.
In that year, Uganda, the United States, and the United Arab Emirates accounted for 9.77%, 9.47%, and 8.56% of Kenyan exports respectively. These were Kenya’s most important export destinations.
If the war resulted in the total loss of the Persian Gulf as a destination market, Kenya would stand to lose US$1.073 billion, or 41.44% of its exports to Asia.
This would account for losses from the United Arab Emirates, Saudi Arabia, Iran, and Bahrain.
On the imports side, Kenya would lose supplies worth US$3.57 billion.
Kenya’s trade balance would improve from a deficit of US$-13.69 billion to a smaller deficit of US$-11.191 billion, representing a 15.4% decrease.
86.1% of Kenya’s US$2.52 billion in exports to the UAE were made in refined petroleum.
This is because when oil marketing companies like TotalEnergies, Vivo Energy and others that have fuel concessions supply fuel to international airlines at the Jomo Kenyatta International Airport (JKIA), the Kenya Revenue Authority (KRA) officially records the value of that fuel as a re-export.
In this case, Kenya was making significant refuels to aircraft owned by firms headquartered in the United Arab Emirates, including Emirates, Etihad, Flydubai, and Air Arabia.
In response to UAE demand, in 2024 Kenyan fuel re-exports surged, making the UAE the most important export destination.
In the previous year, 51.8% of Kenya’s US$733 million exports to the UAE were made in gold.
By 2024, gold was no longer a major feature of Kenyan exports to the UAE. In that year, gold exports fell to US$841,000.
Kenyan exporters of tea, tropical fruits, and cut flowers accounted for 9.31%, 6.33%, and 4.67% of Kenya’s US$754 million exports to the UAE.
Alongside exporters of sheep and goats, these traders will find their incomes disrupted.
In 2024, 86.1% of Kenyan imports from the UAE were made in refined petroleum.
Disruptions to transportation of refined petroleum from the UAE will place Kenyan consumers in a precarious situation.










