Kenya Business · Market Intelligence
The ceasefire is not a clearance signal. Here is what Kenya’s businesses are actually facing.
The two-week Gulf ceasefire announced this week has been widely reported as a relief. For Kenyan businesses, it is not — at least not yet. East Africa’s refined fuel reserves are expected to hold only until mid-May. Even once the Strait of Hormuz fully reopens, new shipments take a minimum of three weeks to arrive at East African shores. Meanwhile, the IMF’s managing director warned this week that the Iran war will leave lasting “scarring effects” on the global economy: lower growth, higher inflation, and 45 million more people pushed into food insecurity. For any business operating in Kenya today — with exposure to fuel costs, imported goods, USD contracts, or consumer demand — this is not background noise. It is a planning problem that needs to be addressed now.
Fuel: pump prices are rising, and the window before shortages is short
Kenya imports almost all of its refined petroleum products — petrol, diesel, kerosene — from the UAE, Saudi Arabia, Qatar, and Bahrain. These are the same countries at the heart of the conflict. Reserves may last until mid-May, but the situation on the ground is already deteriorating: some petrol stations have begun rationing, and government officials have been implicated in irregular fuel imports that bypassed official government-to-government supply arrangements. Kenya’s next fuel price review is imminent.
Tanzania offers the clearest preview of what is coming. When Ewura, Tanzania’s energy regulator, adjusted prices on 1 April, pump prices rose more than 30% overnight — petrol reaching Tsh 3,820 per litre, with inland regions exceeding Tsh 4,000. The regulator’s director-general was dismissed a day later after the price move contradicted government assurances that reserves would hold until mid-May. President Samia Suluhu ordered carpooling for senior government officials and directed her own convoy to consolidate into a single bus. These are not abstract signals — they are the political and economic consequences of a genuine supply crisis already playing out 500 kilometres south of Nairobi.
Higher fuel costs affect virtually every sector of the Kenyan economy. Transport and logistics costs rise immediately. Agricultural inputs — fertiliser delivery, irrigation pumping, cold chain — become more expensive. Manufacturing output costs increase as diesel-dependent processes get repriced. Backup generation for businesses and hospitals draws on the same constrained supply. And even after Hormuz reopens, the IMF has flagged that infrastructure damage at Qatar’s Ras Laffan gas complex — one of the most critical petrochemical facilities in the world — means there will be no clean return to pre-war conditions. Brent crude is trading at $96 per barrel, with JP Morgan warning prices could reach $120 if the Hormuz stalemate extends into July.
The shilling: Standard Bank forecasts 137.2 by end of year
The shilling is under sustained pressure — and the numbers are specific. Kenya’s usable FX reserves dropped from USD 14.59 billion at the start of March to USD 13.35 billion by 8 April 2026: a drawdown of USD 1.24 billion in just six weeks, driven by external debt service payments and CBK sell-side interventions to defend the exchange rate. The shilling currently sits at 129.16 per dollar.
Standard Bank Research, writing on 10 April, projects the KES reaching 132.8 by the end of Q2, 136.1 by Q3, and 137.2 by Q4 2026. That is a 6.2% depreciation from today’s rate over the course of the year. For any business that imports goods priced in USD, services foreign-currency debt, or holds contracts denominated in dollars, this trajectory is not a worst-case scenario — it is the base case from one of the continent’s leading research houses, published this week.
The CBK responded to April’s MPC meeting by holding its benchmark rate at 8.75% — pausing a rate-cutting cycle that began in August 2025 — and Standard Bank forecasts the Bank will begin hiking to 9.75% by Q4 2026 as inflation rises. Higher borrowing costs compound the currency pressure: financing inventory, capital expenditure, or working capital becomes more expensive precisely when input costs are rising. The IMF’s note that Kenya could see its current account deficit deepen by 0.6% of GDP to approximately 3.0% of GDP — driven by weaker exports, services, and remittances from conflict-affected trading partners — adds a further structural drag.
The macro picture: growth down, inflation up, fiscal space shrinking
The CBK revised Kenya’s GDP growth forecast down 0.2 percentage points to 5.3% for 2026 and sharply lifted its inflation projection — from 4.6% to 6.2% by July, staying near 6.0% through year-end. Kenya’s March PMI fell to 47.7, signalling the first contraction in the private sector after a six-month expansion streak, as firms flagged supply disruptions, higher shipping costs, and unpredictable taxation as acute constraints. Non-performing loans in the banking system edged up from 15.4% in December 2025 to 15.6% by March 2026.
Fiscal headroom is also deteriorating. This week, President Ruto assented to a Supplementary Appropriations Bill that increased government spending by KES 393.16 billion — equivalent to 2.1% of GDP — pushing the total fiscal deficit to approximately 6.8% of GDP for FY2025/26. With elections approaching in 2027, the political incentive to tighten spending is limited. Standard Bank’s note explicitly cautions that the government struggled to contain spending in FY2025/26 and that fiscal discipline “may prove more trying in FY2026/27.” The implication: expect continued pressure on the KES, limited fiscal buffers to absorb further shocks, and an environment in which external market access becomes more important and potentially more fragile.
The Kenya pressure stack at a glance
| Indicator | Current / Forecast | Direction | Business Risk |
|---|---|---|---|
| Kenya fuel reserves | Hold until ~mid-May only | ▼ Depleting | Critical |
| Brent crude oil | $96/bbl — JP Morgan $120 risk | ▲ Rising | Critical |
| KES / USD rate | 129.16 now → 137.2 by Q4 2026 | ▼ Weakening | High |
| CBK FX reserves | USD 13.35bn (↓ USD 1.24bn in 6 wks) | ▼ Declining | High |
| Kenya CPI inflation | 4.4% now → 6.2% by July 2026 | ▲ Rising | High |
| CBK policy rate | 8.75% held → 9.75% forecast Q4 2026 | ▲ Hike cycle ahead | Medium |
| Kenya GDP growth — 2026 | Revised down to 5.3% | ▼ Slowing | Medium |
| Kenya PMI (March 2026) | 47.7 — first contraction in 6 months | ▼ Deteriorating | Watch |
| Fiscal deficit FY2025/26 | ~6.8% of GDP after supplementary spend | ▲ Widening | Watch |
What businesses should do before the end of April
If your operating budget, supplier contracts, or customer pricing was set before March 2026, it almost certainly underestimates your cost base for Q2–Q4. Fuel, freight, and any USD-denominated input will all be higher. Identify which line items are most exposed and requote or renegotiate before the gap becomes a loss.
Standard Bank’s 137.2 forecast is not a stress test — it is the base case from a major research house, published this week. Run your P&L through that rate for H2 2026, specifically for any USD-denominated costs. The businesses caught off-guard will be those that treated a weakening shilling as temporary noise rather than a structural trend.
Tanzania’s 30% overnight pump price increase is a live data point, not a hypothetical. Kenya’s review is imminent. Any business relying on road freight — for inbound materials, outbound goods, or staff movement — should add a fuel cost buffer to its H2 planning and review any fixed-price transport contracts that are now underwater.
The two-week ceasefire is inherently fragile. Standard Bank cautions that its own projections may underestimate the conflict’s impact, and that Kenya could find itself in a precarious FX position again if external markets close. Qatar’s Ras Laffan infrastructure damage means energy supply chains face structural disruption even in a best-case political resolution. Plan for the base case, stress-test for the downside.
The ceasefire buys time, not certainty. Kenya’s fuel reserves expire in weeks, the shilling is on a forecast path to 137.2 by Q4 2026, inflation is heading to 6.2% by July, and a rate hike cycle is expected from Q4. Globally, the IMF will publish downgraded growth forecasts next week. Qatar’s petrochemical infrastructure damage means there is no clean supply chain reset even after Hormuz reopens. The businesses that act on these numbers now — repricing, hedging, building contingency — will be better placed than those waiting for a stability signal that may not arrive before costs have already moved.
Questions about how this affects your business?
We share this analysis because the businesses we work with deserve to understand the conditions shaping their costs. Reach out to our team if you would like to talk through the implications.
Sources: Standard Bank Research / Stanbic Bank Kenya, “Kenya: buffers still holding – but fiscal pressure may worsen” (10 April 2026); City A.M. / OilPrice.com, “IMF Warns Iran War Will Leave Lasting Scars on Global Economy” (10 April 2026); The East African, “Why East Africa fuel crisis will linger after Iran war ceasefire” (11 April 2026); Business Daily Africa, “What a prolonged Iran war means for Kenya investors” (April 2026).