Global oil prices have surged above $100 per barrel amid an active military crisis at the Strait of Hormuz, threatening to inflate Ethiopia's substantial fuel import costs as the landlocked nation remains entirely dependent on petroleum product imports.
The price surge follows the actual closure of the Strait of Hormuz by Iranian forces, disrupting the passage of roughly 20% of global oil through the critical energy chokepoint. Military conflict in the region has created severe supply chain disruptions, according to Al Jazeera coverage of the crisis.
Ethiopia spends over $2 billion annually on fuel imports, according to Bloomberg, making the country particularly vulnerable to global oil price shocks. The nation imports 100% of its petroleum needs, primarily through the Port of Djibouti, meaning any sustained price increase directly impacts the country's foreign currency reserves and trade balance.
The energy crisis is creating winners and losers across the global economy, with oil-producing nations benefiting from higher revenues while import-dependent countries face mounting costs. For Ethiopia, already managing a challenging foreign exchange situation following its currency reforms, rising fuel costs compound existing economic pressures.
Regional implications extend beyond Ethiopia, as other landlocked East African economies face similar vulnerabilities. Countries like Rwanda, Uganda, Kenya, and Tanzania — all dependent on fuel imports through coastal neighbors — are experiencing comparable exposure to global energy price volatility.
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The Ethiopian Petroleum Supply Enterprise (EPSE) historically managed fuel price fluctuations through subsidies, though the government has effectively ended blanket fuel subsidies as of May-June 2025, according to the IMF Fourth Review. Fuel prices rose approximately 43% cumulatively in 2025 following the subsidy removal.
Fuel costs directly impact Ethiopia's inflation trajectory, as transportation and energy expenses ripple through the broader economy. The country's inflation rate stood at approximately 9.7% in February 2026, according to the Ethiopian Statistical Service, with energy costs contributing to price pressures.
The energy crisis highlights Ethiopia's import dependency as a landlocked economy reliant on petroleum products for transportation. The Grand Ethiopian Renaissance Dam was inaugurated in September 2025 with 5,150 MW capacity, making it Africa's largest hydroelectric project, while the Gode Oil Refinery broke ground in October 2025 as part of efforts to develop domestic energy infrastructure.
