The Senegalese government has banned all non-essential foreign trips for government ministers as part of cost-saving measures triggered by the energy crisis linked to the Iran war, Prime Minister Ousmane Sonko announced. Senegal imports most of the petroleum products it consumes, leaving its economy vulnerable to supply disruptions such as the closure of the Strait of Hormuz. The country's initial budget forecasts were based on an oil price of $62 per barrel, which is now almost double as a result of the Iran war, according to Sonko. He stated that he has taken drastic measures to restrict government spending, including canceling nonessential missions abroad, and added that no minister will leave except for essential missions. According to Aftonbladet, Prime Minister Ousmane Sonko canceled several trips, including to Niger, Spain, and France.
The war in the Middle East is upending lives and livelihoods in the region and beyond, dimming the outlook for many economies that had just shown signs of recovery from previous crises, according to research from six sources. Energy prices, supply chains, and financial markets are the main transmission channels for the war's economic impacts, with regional effects varying significantly, the research indicates. The shock is global but asymmetric, with energy importers more exposed than exporters, poorer countries more than richer ones, and those with meager buffers more than those with ample reserves, according to the same research.
The de facto closure of the Strait of Hormuz and damage to regional infrastructure is producing the largest disruption to the global oil market in its history, according to the International Energy Agency. Energy shipments from the Middle East have been at a standstill following Iran's threats to attack vessels in a critical trade waterway as retaliation against US-Israeli strikes, according to research from two sources. Oil prices have at points soared to close to $120 (£90) a barrel due to strikes on shipping and energy infrastructure and the effective closure of the Strait of Hormuz, the research notes.
The war has caused serious disruption to the economies of the most directly affected countries, including damage to infrastructure and industries that could become long-lasting, negatively affecting their short-term growth prospects, according to research from six sources. Economies heavily dependent on oil imports in Africa and Asia are finding it increasingly hard to access supplies, even at inflated prices, the research indicates. Parts of the Middle East, Africa, Asia-Pacific, and Latin America face higher food and fertilizer prices and tighter financial conditions, with low-income countries especially at risk of food insecurity, according to the same research.
Senegal's public debt stands at more than 130% of the total annual size of the economy, which Prime Minister Sonko blamed on the previous government. This deep economic vulnerability compounds the immediate crisis, as the country scrambles to implement measures beyond travel bans to mitigate the oil price surge, though specific additional actions have not been detailed.
For millions in Africa, soaring fuel prices have worsened hardships, meaning not being able to commute to work or afford a meal for many in the region, according to Aftonbladet. Other African countries are coping with the oil price rise by reducing fuel levies, rationing electricity, diluting petrol, and sending employees on leave, according to research from six sources.
The blockade has led to a global oil shortage, rocking Gulf-reliant Asian countries hard, with the Philippines mandating four-day work weeks to save fuel and Indonesia seeking ways to avoid burning through reserves that will last just weeks, according to research from two sources. Large energy importers in Asia and Europe are bearing the brunt of higher fuel and input costs, according to research from six sources.
China, the world's largest buyer of oil, is feeling the strain but sits in a better position than its neighbours due to years of statecraft preparing it for a global energy crisis, according to research from two sources. China uses an estimated 15 to 16 million barrels of oil daily, mainly for its massive transportation network, with much of it coming from abroad, according to various market analysts. Gulf countries are a major source of oil for China, with barrels from Saudi Arabia and Iran accounting for over 10% of its imports each, according to the US Energy Information Administration (EIA).
Most of China's imported crude oil comes from Iran and the Middle East through the South China Sea, used as fuel for factories and transportation mainly in southern China, according to research from two sources. China's north is mainly powered by domestically produced oil and pipeline imports from Russia, which are not disrupted by the war in the Middle East, the research notes. Russian oil accounts for nearly a fifth of China's energy imports, making Moscow by far Beijing's biggest oil supplier, despite sanctions from the US and Europe, according to the same research.
Coal is the dominant source of power for most of China's electricity, available in abundance locally, with China being the world's largest coal producer accounting for over half of global production, according to research from two sources.
The effective closure of the Strait of Hormuz has led to a restriction of fertilizer supply, with an estimated 30% of this essential farming input going through the Gulf, according to research from six sources. The International Rescue Committee described the fertilizer supply restriction as a food security timebomb, particularly for East Africa.
Global energy markets dependent on imported fossil fuels are at the mercy of global commodity markets due to the Middle East crisis, with all countries facing indirect threats of higher costs from tighter fossil fuel markets and elevated geopolitical risk premiums, according to research from six sources. Sam Reynolds, Research Lead for LNG/Gas in Asia, noted in a press release that exposure to global commodity markets poses a perpetual risk of disruption, and renewable energy offers a strategic hedge against this kind of commodity market volatility.
All roads lead to higher prices and slower growth due to the war, with outcomes depending on conflict duration, spread, and damage to infrastructure and supply chains, according to research from six sources. Prolonged escalation could cause energy price spikes to spill over into core economic indicators like inflation, interest rates, trade balances, and GDP growth, derailing fiscal and monetary goals, the research indicates.
Key unknowns persist, including how long the Strait of Hormuz is expected to remain effectively closed and what conditions are necessary for reopening. The exact current oil price per barrel and its comparison to pre-war forecasts in different countries also remain unspecified, complicating recovery projections.