The true impact of Iran-US war on the Kenyan economy

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When the Kenya Export Promotion and Branding Agency (Keproba) recently convened a meeting for exporters in Mombasa, it became evident that the country is facing a crisis in its international trade sector since the Middle East conflict began in February this year.

Keproba urged the roundtable of Mombasa exporters to diversify their export markets, particularly by exploring intra-African trade opportunities to offset the losses.

With Kenyan tea and cut flowers stuck at the Mombasa Port for a month due to the Iran conflict, traders are incurring losses amounting to millions of shillings, and disruptions persist.

According to Keproba, regional instability is affecting Kenya’s international trade through several interconnected channels, creating challenges that require careful strategic navigation.

The crisis meeting was attended by Keproba chairman Dennis Murithi and CEO Floice Mukabana. A primary concern is the significant disruption to air freight services.

The suspension of flights to key Middle Eastern hubs, including the United Arab Emirates (UAE), has severely restricted cargo and passenger movements.

“This is a particularly sensitive issue, as it directly impacts the horticulture sector, Kenya’s top export earner, which generated Sh203.6 billion in 2024, by threatening the timely delivery of its high-value, perishable products to major markets in the Middle East and Far East Asia,” Keproba reported.

The agency stated that Kenya is also closely monitoring the situation at vital maritime chokepoints, notably the prolonged disruptions in the Strait of Hormuz and the Bab al-Mandeb Strait, which raise serious concerns about global trade.

“This uncertainty has already prompted major shipping lines to exercise caution, suspending bookings and effectively halting the inflow of key inputs and crude oil that support our industries.

“This is notably affecting the re-export sector, which had shown remarkable growth with a 77.3 per cent increase in 2024, mainly driven by jet fuel destined for the UAE, now facing significant logistical hurdles,” the report added.

Furthermore, the 13 per cent rise in global oil prices presents a macroeconomic challenge for Kenya as a net importer of petroleum.

“While 2024 saw a welcome rebound in imports of petroleum products, signalling economic recovery, the looming price shocks threaten to raise production costs across all export sectors and intensify inflationary pressures.

The government is aware of these risks and is exploring measures to mitigate their impact on Kenyan businesses,” it stated. Keproba warns that the escalating Iran-Israel conflict poses the greatest threat to Kenya’s international trade since the Russia-Ukraine war, imperilling the strong export growth of 2024, when total exports reached a record Sh1.112 trillion, driven by a 77.3 per cent surge in re-exports and robust performance in horticulture (Sh203.6 billion), tea (Sh189.1 billion), apparel (a 24.9 per cent increase), and pharmaceuticals (12.5 per cent).

“The crisis now endangers Sh164.65 billion of Kenya’s annual exports to the Middle East via three main channels: suspension of air freight to key hubs, paralysis of maritime trade through vital chokepoints, and a 13 per cent increase in global oil prices that could reignite inflation and widen the current account deficit,” the report said.

Among the most affected sectors are re-exports (mainly jet fuel to the UAE), projected to shrink by 19.5 per cent in 2026 with no immediate alternatives.

Tea is expected to decline by 18.0 per cent in 2026, mainly due to the effective closure of the Iranian market (Sh5.98 billion) and logistical issues in the UAE and Saudi Arabia. Horticulture, including cut flowers, is forecast to contract by 11.6 per cent in 2026, with cut flowers experiencing a sharper decline of 9.8 per cent due to dependence on air freight, while vegetables and fruits are expected to contract by 12.1 per cent.

A partial recovery is anticipated in 2027, contingent on the normalisation of logistics and diversification into alternative markets,” Keproba noted. The disruption has caused tea traders to lose about $24 million (over Sh3 billion) weekly in the past three weeks, as their exports remain at ports and warehouses in Mombasa. Stakeholders warned that geopolitical tensions involving Iran and the wider Middle East are already affecting critical logistics routes, causing shipment delays and increased uncertainty for traders.

Exporters highlighted Kenya’s reliance on a limited number of markets, which has heightened vulnerability to external shocks, underscoring the need for urgent diversification of export destinations.

East African Tea Trade Association (EATTA) managing director George Omuga said the disruption in the flow of goods to the Middle East has led to congestion at the Port of Mombasa, as buyers and exporters had already purchased tea before the escalation of the conflict in Iran.

“It means that every week since the war began, 20 per cent of our tea destined for Middle East countries has remained in Mombasa. On average, we export about two million kilogrammes to the Middle East every week,” said Omuga. He added, “For the past three weeks, we estimate that between six and eight million kilograms are lying in warehouses in Mombasa or at the Port of Mombasa.”

Mukabana urged exporters to tap into new markets across Africa by leveraging the African Continental Free Trade Area (AfCFTA) following the decline in exports to the Middle East due to the ongoing conflict in Iran.

“The conflict presents an opportunity for exporters to diversify into alternative markets and cushion themselves against mounting losses,” she said.

Mukabana said the forum was designed to give exporters a platform to highlight challenges and jointly develop practical solutions. She emphasised the need for industry-driven approaches in addressing bottlenecks affecting trade.

Murithi noted that Kenya’s exports have grown to approximately Sh1.1 trillion but stressed that the country must capitalise on new opportunities, including recently secured tariff-free access to the Chinese market, to sustain growth.

Locally, exporters also pointed to operational inefficiencies at the Port of Mombasa, where delays have seen containers remain at the port for up to three weeks instead of the expected two to three days. Industry players say the delays are disrupting supply chains, delaying payments, and straining business operations.