Ethiopia has deployed emergency fuel subsidies and is drawing on strategic reserves after the US-Israel-Iran conflict, which began on February 28, 2026, triggered the closure of the Strait of Hormuz and sent global oil prices to their highest levels since 2022, with Brent crude settling above $102 a barrel by mid-March. Finance Minister Ahmed Shide confirmed on March 11 that the government has sharply increased subsidy rates to keep domestic prices affordable despite the surge in international costs.
- Global white diesel prices have risen from 53.68 birr ($0.34) per litre to 238.13 birr ($1.52), a 343% increase. The government is selling diesel domestically at 139.84 birr ($0.90) per litre, absorbing a subsidy of 98 birr ($0.63) per litre on every unit sold.
- Petrol, previously subsidised at 28.77 birr ($0.18) per litre, now trades at 205.74 birr ($1.31) globally. The government is supplying it at 132.18 birr ($0.84), with a subsidy of 73.56 birr ($0.47) per litre.
- Ethiopia imports more than $4.2 billion in fuel annually, sourcing the majority from Gulf states, particularly the UAE. The Strait of Hormuz, now disrupted by the conflict, carries approximately 20% of global oil and LNG flows.
- The government is carrying out emergency additional fuel purchases and releasing supplies from established strategic reserves to prevent shortages. A nationwide crackdown on illegal fuel trading has also been launched, targeting operators selling outside official channels or above regulated prices.
- Prime Minister Abiy Ahmed travelled to Abu Dhabi for talks with UAE leadership on March 11, with the economic fallout from the conflict and the disruption of Iranian strikes on UAE sites a central agenda item.
Ethiopia is caught in a particularly acute bind. It relies entirely on imported petroleum products and has no domestic oil production. Its $3.4 billion IMF-backed reform programme is specifically designed to reduce fuel subsidies as part of fiscal consolidation, yet the government is now moving in the opposite direction under emergency conditions. The tension between the IMF programme’s subsidy reduction targets and the political imperative of shielding consumers from triple-digit fuel price spikes will define the fiscal pressure on Addis Ababa for as long as the Strait of Hormuz remains disrupted. Ethiopia’s economy grew 7.2% in 2025 and has maintained strong growth since 2022, but energy price shocks of this magnitude feed directly into food inflation, transport costs and manufacturing input costs in a country where 70% of the population relies on agriculture.
Bigger Picture: Ethiopia’s exposure to the Middle East oil shock is a window into a broader African vulnerability. Thirteen of the continent’s 54 nations rely on the Gulf corridor for the majority of their fuel imports. The IEA has described the Strait of Hormuz closure as the largest disruption to energy supplies in history, and J.P. Morgan’s global commodities research team has flagged the central question of how long fuel importers can sustain supply before shortages deepen. For Africa, the implications go beyond the fuel pump: shipping cost increases affect the price of every imported good, port throughput drops where cargo is rerouted, and airline connectivity to Gulf hubs faces disruption. Ethiopia’s emergency subsidy response buys time but adds to a fiscal bill that was already stretched. The strategic question for African economies is not how to survive this shock but how quickly they can build the domestic energy diversification, EV infrastructure, and alternative import corridor capacity to reduce the structural exposure that this crisis has made visible.
Sources: The East African / Ethio Negari / BOE Report
