Kenya is among the countries likely to benefit from lower fuel prices in the coming months after Iran agreed to a ceasefire deal with the United States and announced the reopening of the Strait of Hormuz, a critical global oil shipping route.
Experts say the development is expected to ease concerns over disruptions to global oil supplies that had emerged after tensions between Iran, the United States and Israel escalated, triggering fears of higher fuel prices worldwide.
The Strait of Hormuz is one of the world's most important energy corridors, with roughly 20 per cent of global crude oil supplies passing through the narrow waterway linking the Persian Gulf to international markets.
Its closure had effectively halted the movement of hundreds of vessels, with the International Chamber of Shipping estimating that about 500 ships and 20,000 seafarers had been stranded in Gulf waters during the crisis.
The reopening is particularly significant for Kenya because the country's government-to-government fuel supply programme relies heavily on petroleum products sourced from Gulf nations, including Saudi Arabia and the United Arab Emirates. Under the arrangement first introduced in March 2023, Kenya purchases fuel on a 180-day credit basis from suppliers linked to Saudi Aramco, Abu Dhabi National Oil Company (ADNOC) and Emirates National Oil Company (ENOC), helping ease pressure on the country's foreign exchange reserves and support the Kenya Shilling.
Industry analysts have indicated that tankers linked to Kuwait, Iraq, the United Arab Emirates and Saudi Arabia are likely to be among the first vessels allowed to resume normal passage through the strait following the agreement.
The return of normal shipping operations could help stabilise global oil markets by reducing supply uncertainties, lowering freight and insurance costs, and easing pressure on crude oil prices that had surged during the conflict.
Under the ceasefire agreement, Iran has committed to immediately reopening the Strait of Hormuz while the United States moves to lift naval restrictions that had affected shipping in the region.
Pakistan Prime Minister Shehbaz Sharif, who helped mediate the negotiations, announced that the historic Islamabad Memorandum of Understanding had been electronically signed between the United States and Iran. The memorandum entered into force with immediate effect.
"Given the elevated earnings still prevalent in the tanker sector, higher war risk insurance is unlikely to be an obstacle," Tim Smith, director at MSI, a maritime industry analysis firm, told AFP.
Any sustained decline in global oil prices could eventually be reflected in Kenya's fuel pricing formula through lower landed import costs. This would increase the chances of further reductions in pump prices during future reviews by the Energy and Petroleum Regulatory Authority (EPRA). Beyond fuel prices, lower import costs could also reduce demand for U.S. dollars needed to purchase petroleum products, offering additional support to the Kenyan shilling and easing inflationary pressures across the economy.
For now, Kenyans can only wait and watch as global oil markets adjust to the news, but the signs are promising for a country that has felt the pinch of every twist and turn in the Middle East conflict.
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