Ethiopia has introduced emergency fuel subsidies to shield households and businesses from the global oil price surge triggered by escalating conflict in the Middle East.

The government is subsidising petrol and diesel to keep domestic prices stable despite sharp increases in international fuel markets. The move comes as international energy markets react to disruptions around the Strait of Hormuz, one of the world’s most critical oil transit routes. 

The channel carries roughly a fifth of global oil supplies, and its effective closure has pushed fuel costs sharply higher across import-dependent economies.

In remarks reported by state media, Ethiopia’s Finance Minister, Ahmed Shide, said the government had expanded subsidies to keep domestic fuel prices relatively stable despite the spike in global markets.

“To shield citizens from skyrocketing global prices, the government has significantly increased subsidies,” Shide said, noting that diesel is now being supplied at 139.84 birr (about $0.90) per litre, supported by a subsidy of 98 birr (roughly $0.63). Petrol is being sold at 132.18 birr per litre (approximately $0.85), with a subsidy of about 73.56 birr ($0.47). The exchange calculations are based on recent conversion rates, where one Ethiopian birr is worth roughly $0.0064.

The price intervention reflects the scale of the shock facing Ethiopia, which imports most of its refined fuel from Gulf producers, particularly the United Arab Emirates. According to the finance ministry, the global price of white diesel has jumped dramatically from 53.68 birr (around $0.34) per litre to 238.13 birr (about $1.53) per litre in the wake of the crisis. Authorities say the government is also purchasing additional fuel supplies to prevent shortages.

The current disruption stems from military escalation after the United States and Israel launched attacks on Iran aimed at dismantling Tehran’s nuclear and missile capabilities. Iran retaliated by striking US military installations in Gulf states and shutting down shipping through the Strait of Hormuz. The conflict has raised fears of a prolonged energy shock that could ripple through emerging markets and import-dependent economies across Africa.

Geopolitical consultancy Alpine Macro, an affiliate of Oxford Economics, recently revised its outlook for the crisis, suggesting the disruption could last as long as two months. Earlier estimates had suggested the closure might last only a few weeks. US President Donald Trump previously indicated the military operation in Iran could last around five weeks.

Dan Alamariu, Alpine Macro’s chief geopolitical strategist, said both sides face strong incentives to avoid a prolonged war. “For both sides, a long war is a huge political gamble,” he said, adding that political self-preservation could limit the conflict’s duration.

Despite the turbulence in global energy markets, Ethiopia’s broader economic outlook remains relatively strong. The country recorded growth of 7.2 percent in 2023 and 8.1 percent in 2024, with expansion estimated at about 7.2 percent in 2025.

Prime Minister Abiy Ahmed has pursued a programme of economic liberalisation since taking office in 2018, opening previously state-controlled sectors to foreign investors. The reform push recently gained support from the International Monetary Fund, which approved a $261 million financing package earlier this year, signalling confidence in Ethiopia’s ongoing fiscal and monetary reforms.