How a US-Iran War Could Hit Ugandans Hardest

By Wilfred Arinda Nshekantebirwe

The U.S. and Israeli strikes which started on Iran on February 28, 2026, have triggered a shift in global markets that reflects poorly on the immediate economic stability of Uganda. While the physical theater of war is thousands of miles from Kampala, the interconnected nature of modern trade means that the “economic radiation” from these strikes will be felt through volatile commodity prices and currency fluctuations.

Data from the Bank of Uganda (BoU) in their late 2025 State of the Economy reports indicates that the Middle East has surpassed the East African Community (EAC) as the primary destination for Ugandan exports, accounting for roughly 42.7% of total export earnings. A conflict involving a major regional power like Iran risks a total paralysis of these trade routes, potentially vaporizing a trade surplus that the Ministry of Finance, Planning and Economic Development (MoFPED) recently valued at over $316 million.

The most immediate “pain point” for the average Ugandan is the price of fuel. According to the Uganda Bureau of Statistics (UBOS), transport inflation is the most significant driver of the Consumer Price Index (CPI). Uganda is a net importer of refined petroleum, and according to the Ministry of Energy and Mineral Development, the country consumes approximately 7 million liters of petroleum products daily.

With 90% of these imports sourced from or through the Arabian Gulf, any disruption to the Strait of Hormuz, a narrow waterway where the U.S. Energy Information Administration (EIA) notes 21 million barrels of oil pass daily, will cause an immediate supply shock. If global crude prices spike toward the $140 per barrel mark, as projected by Goldman Sachs analysts in “worst-case” escalation scenarios, the price of petrol at Ugandan pumps could realistically jump from UGX 5,000 to over UGX 8,500. This could fuel inflation rates exceeding 10%, up from projected 3.8-4.3% in 2026 under baseline scenarios, as seen in past global fuel crises.

Higher costs would impact sectors like agriculture (Uganda’s largest export earner, including coffee and tea) and manufacturing, potentially reducing projected GDP growth from 6.5-7% in FY2025/26 to 5-6%, leading to a GDP shortfall of UGX 12-25 trillion (about $3-7 billion) from the baseline forecast of UGX 254.2 trillion. Unemployment could rise by 1-2 percentage points, exacerbating poverty affecting 25% of the population.

On a positive note, if Uganda’s oil sector, expected to ramp up exports around 2025-2026 gains momentum, elevated global oil prices could boost government revenues from crude sales by 15-30%, potentially adding UGX 5-10 trillion annually once production hits scale. However, as a net importer currently, the short-term pain from import costs would likely outweigh benefits, with oil price volatility reducing the net present value of Uganda’s oil revenues by up to 37% in moderate disruption scenarios.

The strength of the U.S. Dollar serves as another transmission mechanism for this crisis. In times of global conflict, investors flee to the dollar as a “safe haven” currency. This causes the Ugandan Shilling to depreciate rapidly. In December 2025, the Bank of Uganda mid-rate for the dollar sat at approximately UGX 3,507; however, in the wake of the strikes, currency traders may witness a shilling come under immense pressure.

A weaker Shilling makes all imports more expensive. Data from the Uganda Revenue Authority (URA) shows that Uganda’s import bill is dominated by machinery, electronics, and chemical products, largely sourced from China and India. Because these international transactions are settled in USD, a 10% depreciation of the Shilling effectively acts as a 10% tax on every piece of equipment or medicine entering the country.

This currency volatility also complicates national debt management. The Auditor General of Uganda reported in 2025 that the national debt had hit Shs 115.4 trillion. Since a massive portion of this debt is denominated in foreign currency, every “point” the Shilling loses against the Dollar adds billions of Shillings to the cost of debt servicing, money that the Parliamentary Committee on the Budget notes is being diverted from critical sectors like healthcare and the Parish Development Model (PDM).

Furthermore, the human element of this conflict cannot be overstated. The Ministry of Gender, Labour and Social Development estimates that there are currently over 200,000 Ugandan migrant workers, commonly known as Abakyeyo, stationed across the Middle East, particularly in the UAE, Saudi Arabia, and Jordan. These workers are the lifeblood of Uganda’s secondary economy.

The Bank of Uganda reported that personal remittances reached an all-time high of $1.64 billion in 2025. If the conflict escalates into a regional conflagration involving Iran’s neighbors, these workers face the dual threat of physical danger and job loss. A sudden cessation of remittances would cause a liquidity crisis in thousands of Ugandan households who rely on these funds for school fees and small-scale construction.

During the June 2025 border escalations, the Ministry of Foreign Affairs was already forced to coordinate “safe haven” movements for nearly 500 citizens; a full-scale U.S.-Iran conflict would require an evacuation effort of a scale that the Office of the Prime Minister (OPM) is currently ill-equipped to fund.
Finally, the timing of these strikes is particularly precarious for Uganda’s burgeoning oil sector.

The Petroleum Authority of Uganda (PAU) has consistently pointed toward July 2026 as the start of commercial oil production from the Tilenga and Kingfisher projects. While high global oil prices might seem beneficial for a future oil exporter, the International Monetary Fund (IMF) warns that extreme volatility and regional war can scare off the final stages of Foreign Direct Investment (FDI) needed to complete the East African Crude Oil Pipeline (EACOP). The technical equipment required for these final stages often transits through the very waters currently threatened by naval escalation.

While the U.S. strikes target Iranian military infrastructure, data suggests they are simultaneously striking the pocketbooks of Ugandans, threatening a fragile post-COVID recovery and placing the nation’s 2026 economic targets in significant jeopardy.

The writer is the LC5 Male Youth Councillor for Rubanda District
wilfredarinda@gmail.com