The ongoing conflict between Israel and Iran has begun to cast a shadow over economic stability in West Africa, particularly in Nigeria and Ghana.
According to a recent report by SBM Intelligence titled The Escalating Iran-Israel Conflict and its Implications for West Africa, the intensifying hostilities between the two Middle Eastern nations could result in a significant drop in foreign direct investment (FDI) and portfolio inflows into the region.
The firm warns that the geopolitical crisis, which escalated dramatically following Israeli airstrikes on Iranian nuclear and missile sites on June 12, 2025, has created heightened global uncertainty.
The most immediate economic repercussion of the conflict has been the surge in global oil prices. Brent crude jumped by more than 4%, rising from $69.36 to $74.23 per barrel—its sharpest increase this year. While this may offer temporary fiscal relief for Nigeria, which benchmarked its 2025 national budget at $73 per barrel, analysts caution that the windfall is highly volatile.
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Due to long-term crude contracts and Nigeria’s heavy reliance on imported refined petroleum products, domestic fuel prices and inflation are likely to increase, potentially negating the benefits of higher oil earnings.
Beyond oil, the report emphasizes the broader risk of investor aversion. Heightened geopolitical instability typically leads investors to shift capital to safer markets, resulting in a decline in FDI and portfolio investments in emerging regions like West Africa. This capital flight could stall infrastructure and development projects, limit job creation, and increase sovereign borrowing costs. Regional currencies, already under pressure, may depreciate further.
Additionally, SBM Intelligence warns of potential geopolitical fragmentation in West Africa, as states may align themselves differently in response to the crisis. This fragmentation would make a coordinated regional policy response difficult, increasing the region’s vulnerability to both economic and security spillovers from the Middle East conflict. Despite short-term economic opportunities linked to oil, the long-term risks to investor confidence, macroeconomic stability, and regional cohesion are also substantial.
