The Middle East conflict is raising short-term risks for Uganda despite the imminent start of oil production, driven by rising energy prices and concerns about fuel shortages due to reliance on imports. The EACOP construction delay and lack of refining facilities exacerbate these concerns, potentially leading to inflationary pressures. Uganda’s political risk remains elevated, with further downward pressure possible if the conflict persists.
European companies are expected to deliver resilient first-quarter earnings despite the Middle East conflict, but investors are concerned about rising energy prices, supply chain disruptions, and weakening growth. The breakdown of U.S.-Iran negotiations and the Strait of Hormuz blockade raise concerns about potential oil price increases. While European stocks have recovered from an initial dip, the outlook for the rest of the year remains uncertain.
The government is adopting a ‘wait and see’ approach to the escalating conflict in the Middle East and its impact on the global economy, focusing on fuel supply and pricing. It is concerned about the potential blockade of the Strait of Hormuz and is actively gathering information to understand the full extent of the impact on the domestic economy. The government is utilizing a contingency reserve included in the 2026 Budget to prepare for potential shocks.
Initial signs of the Middle East conflict's impact are emerging in Portugal, with declining household sentiment and a downward revision of economic growth forecasts. Rising energy prices are contributing to inflation, and geopolitical developments are introducing downside risks. Portugal's 2025 budget surplus is overshadowed by new fiscal challenges at the start of 2026.
Developed economies have expressed concerns about the Middle East conflict's long-term impact on global growth, inflation, and financial markets. The continued disruption in the Strait of Hormuz poses significant risks to energy security and supply chains, prompting calls for avoiding protectionist measures and prioritizing supply chain stability. Governments are committed to fiscally responsible and targeted domestic responses given constrained balance sheets.
Global finance ministers warned of prolonged market impacts from the Middle East conflict, citing risks to energy security, supply chains, and economic stability. Even with a resolution, growth and market impacts will persist. The statement emphasized avoiding protectionist measures and responsible fiscal responses.
The IMF and World Bank warned that the ongoing Middle East conflict will slow Africa's economic recovery in 2026, with growth projected to fall from 4.5% in 2025 to 4.2% in 2026 due to rising fuel, food, and fertilizer prices. Increased investment risks and a fragile economic outlook are also concerns. Governments are urged to focus on protecting vulnerable households and accelerating reforms for greater resilience.
U.K. Finance Minister Rachel Reeves criticized the Trump administration's handling of the Middle East conflict and called for immediate de-escalation, citing risks to global economic stability due to the closure of the Strait of Hormuz. She questioned the clarity of the war's objectives and urged a return to diplomatic negotiations. Reeves expressed confidence that de-escalation would boost the U.K.'s economic growth and lower inflation.