When distant wars hit home: What a USA, Israel conflict with Iran would mean for Zambia

By Professor LUBINDA HAABAZOKA

A MILITARY confrontation involving the United States and Israel on one side and Iran on the other may appear geographically distant from Zambia.
In economic terms, however, it would be anything but distant. In a globalised system where energy flows through narrow maritime corridors, capital moves instantly across borders, and trade is routed through interconnected financial hubs, geopolitical conflict quickly becomes domestic economic arithmetic.
For Zambia, the transmission channels are clear and quantifiable.
Zambia’s GDP stands around US$30 billion. Imports account for approximately 35 to 40 percent of GDP. Mining contributes more than 70 percent of export earnings. Fuel is almost entirely imported. Fertiliser prices are energy sensitive.
Machinery, auto spare parts, industrial inputs, and even gold trade settlements are closely linked to Gulf commercial hubs. These structural realities mean that an oil shock and a Gulf corridor disruption would not remain external events. They would become internal price pressures.
The oil transmission channel
Nearly 20 percent of global crude oil passes through the Strait of Hormuz. Markets do not wait for physical supply disruption before reacting. They price risk immediately. Even temporary instability adds a geopolitical premium to oil prices.
Under a short two week conflict scenario, Brent crude could remain in the range of US$78 to US$92 per barrel. A conflict extending to one month could push prices into the US 85 to US 105 range. A prolonged several month confrontation involving repeated maritime incidents or infrastructure damage could sustain oil between US 95 and US 130 per barrel, with extreme spikes temporarily exceeding US 120.
Zambia consumes roughly 11 to 13 million barrels equivalent of petroleum products annually. Every US$10 increase in the oil price translates into approximately US$110 to US$130 million in additional annualised import costs.
This excludes higher freight, insurance, and financing charges that typically accompany conflict.
Fuel is not merely a consumer commodity. It is a production input. Transport accounts for a significant share of final goods pricing, especially in a geographically dispersed economy like Zambia. A fuel shock therefore transmits directly into food prices, mining costs, construction inputs, and power generation back up expenses.
Scenario analysis, macroeconomic implications
If the conflict lasts only two weeks, the macroeconomic impact would likely be contained but visible. Inflation could rise by 0.2 to 0.6 percentage points due to transport and distribution adjustments.
The Kwacha could face depreciation pressure of one to three percent as precautionary demand for foreign currency increases. Real GDP growth might undershoot baseline projections by up to 0.2 percentage points.
This would represent a manageable shock, assuming rapid de-escalation and restored market confidence.
If the conflict extends to one month, the pressure becomes more structural. Oil in the US$85 to US$105 range would significantly raise the fuel import bill, potentially widening the current account deficit by 0.5 to 1.2 percent of GDP.
Inflation could increase by 0.7 to 1.8 percentage points, particularly if higher pump prices feed into fertiliser and food costs. Real GDP growth could fall short of baseline by 0.3 to 0.7 percentage points as higher input costs constrain mining operations, SME trade margins, and consumer demand.
Foreign exchange reserves, currently around US$5.5 billion, equivalent to roughly four to five months of import cover, could decline moderately if the Bank of Zambia intervenes to smooth volatility.
Alternatively, allowing exchange rate flexibility would shift more of the adjustment into domestic prices.
In a prolonged several month conflict scenario, macroeconomic consequences become more pronounced. Sustained oil above US$100 per barrel could increase the country’s annualised fuel import burden by US$250 to US$600 million.
The current account deficit could widen by 1.2 to 2.5 percent of GDP unless offset by higher copper or gold prices.
Inflation could accelerate by two to 3.5 percentage points as second round effects emerge, transport fares, food prices, services, and wage expectations adjust upward.
The Kwacha could depreciate by five to 12 percent under sustained pressure, particularly if global investors adopt a risk off posture toward emerging and frontier markets. Real GDP growth could undershoot baseline by 0.8 to 1.8 percentage points.
Such outcomes would not represent economic collapse, but they would represent measurable stress.
Gulf corridor exposure, the amplifier effect
Zambia’s exposure extends beyond crude oil. Dubai functions as a global re export and financial centre through which machinery, spare parts, electronics, and industrial inputs are sourced.
Many Zambian traders rely on Dubai’s wholesale ecosystem.
The port of Fujairah is one of the world’s largest oil storage and bunkering hubs, indirectly underpinning refined fuel flows. Any sustained instability increases shipping insurance premia, freight costs, and delivery risk.
Airlines such as Emirates and Qatar Airways serve as critical cargo connectors, not just passenger carriers. Reduced flight schedules or airspace disruptions raise landed costs for pharmaceuticals, mining inputs, high value components, and perishables. Working capital cycles for SMEs become strained as inventory turnover slows.
Trade finance is another channel. If Gulf-based financial centres tighten liquidity or increase compliance thresholds during conflict, letters of credit and settlement processes become more expensive, costs which are ultimately passed on to consumers.
Sectoral effects
The mining sector remains the backbone of Zambia’s external earnings. Even a five percent increase in imported machinery, explosives, chemicals, and diesel costs materially affects margins in capital intensive operations.
Agriculture is similarly exposed. Fertiliser accounts for up to 30 percent of production costs in crop farming. A 20 percent increase in fertiliser prices can reduce yields or push food prices upward.
In a country where food constitutes a large share of the consumer basket, the social implications are immediate.
Household welfare is particularly vulnerable. Over half of the population remains poor and low income households spend a significant portion of income on food and transport.
A 10 percent increase in staple food prices can sharply reduce real consumption. When fuel, fertiliser and freight costs rise simultaneously, the compound effect intensifies cost of living pressures.
Limited upside
Gold prices often strengthen during geopolitical instability as investors seek safe haven assets. Zambia could benefit marginally through higher gold export receipts. Copper prices may also remain supported if supply chains tighten.
However, unless these gains exceed higher fuel and import costs, the net macroeconomic balance remains negative.
Policy priorities
In the face of such a shock, policy discipline is paramount.
First, maintain transparent communication on fuel supply and foreign exchange conditions to prevent panic behaviour and speculative distortions.
Second, prioritise foreign currency allocation toward fuel, fertiliser, medicines and critical industrial inputs.
Third, strengthen strategic fuel reserves and diversify supply routes beyond concentrated corridors.
Fourth, protect macroeconomic stability through fiscal prudence, avoiding broad based fuel subsidies that can destabilise public finances and reverse consolidation gains.
Fifth, expand targeted social protection if inflation rises sharply, focusing on vulnerable households rather than universal price controls.
Economic resilience is not built during a crisis. It is revealed during one.

HEADLINE NUMBERS, POSSIBLE MACRO IMPACT ON ZAMBIA
If conflict lasts 2 weeks
Oil price range, US$78 to US$92 per barrel
Inflation impact, plus 0.2 to 0.6 percentage points
Kwacha pressure, one to three percent depreciation
Growth impact, minus 0.0 to 0.2 percentage points
If conflict lasts 1 month
Oil price range, US$85 to US$105 per barrel
Inflation impact, plus 0.7 to 1.8 percentage points
Current account deterioration, 0.5 to 1.2 percent of GDP
Growth impact, minus 0.3 to 0.7 percentage points
If conflict lasts several months
Oil price range, US$95 to US$130 per barrel
Additional fuel import pressure, US$250 to US$600 million annualised
Inflation impact, plus 2.0 to 3.5 percentage points
Kwacha pressure, five to 12 percent depreciation
Growth impact, minus 0.8 to 1.8 percentage points
In today’s interconnected system, wars are no longer confined by geography. They are transmitted through prices, currencies, supply chains, and expectations.
For Zambia, the decisive variables are duration, oil intensity and policy response.
Geopolitics has become economics and preparedness has become strategy