A sudden spike in oil prices following Israel’s recent airstrikes on Iranian nuclear facilities is sparking fresh concerns in Nigeria, where experts warn that fuel costs could surge once again, just as the country struggles with foreign exchange instability, economic hardship, and lingering public discontent over subsidy removal.

According to Bloomberg, Brent crude soared by up to 13% in intraday trading following the airstrikes, the biggest single-day increase since March 2022, before eventually settling with a 7.6% gain. The strikes reportedly hit key Iranian nuclear sites and killed high-ranking military officials, dramatically escalating long-simmering tensions in the Middle East.

As geopolitical uncertainty rattles global energy markets, Nigeria—Africa’s largest oil producer but a net importer of refined fuel—stands especially vulnerable to the ripple effects.

Rising Tensions, Soaring Prices

The latest escalation began on June 12, when Israel launched multiple strikes on Iranian sites, including the Natanz nuclear facility and locations in Tabriz. Israeli Prime Minister Benjamin Netanyahu claimed the attacks targeted Iran’s nuclear and ballistic missile programs, vowing to continue operations until the perceived threat was neutralized. In response, Iran launched over 100 drones, intensifying fears of a broader regional conflict.

Market reactions were swift:

• Brent crude surged to as high as $78 per barrel, before moderating to around $73.

• Gold prices jumped by 1%, reaching a one-month high as investors sought safer assets.

• S&P 500 futures dipped by 0.9%, reflecting wider financial market anxieties.

For Nigeria, such volatility has both upside and downside implications.

Nigeria’s Dual Exposure: Revenue vs. Cost

Speaking to Nairametrics, Jide Pratt, Country Manager of TradeGrid and COO of Aiona, explained the direct implications for Nigeria’s economy.

“Iran, being a major oil-producing nation, is a trigger for the prices of crude oil,” said Pratt. “With the bombing, the immediate effect we see is that prices of Brent have gone up.”

While higher crude prices can translate into increased export revenues for Nigeria, there’s a catch.

“If this escalates, then the prices will go up—and so will the prices of distillates here in Nigeria and across the world,” Pratt warned.

Because Nigeria imports most of its refined petroleum products—including petrol—any rise in global crude prices increases the cost of importing fuel, especially in a fully deregulated market.

Moreover, Nigeria’s volatile exchange rate could amplify the impact.

“What makes it worse will be if we do not keep our exchange rate consistent and constant,” Pratt added.

Domestic Impact: Consumers to Bear the Brunt

With fuel subsidies removed in 2023 and market forces now largely determining pump prices, any rise in the global oil benchmark inevitably feeds into the domestic cost of fuel.

Energy economist Edwin Eze, from the Abuja-based Centre for Energy Policy, emphasized that Nigerians may soon feel the heat.

“For Nigeria, that could mean an increase in landing costs and ex-depot prices, which may eventually be passed on to consumers,” he said.

The landing cost—the total expense incurred to bring imported fuel into the country—increases with rising crude prices and currency depreciation. These, in turn, affect the ex-depot price, which marketers use to determine how much to sell to fuel stations. Ultimately, this cost burden filters down to the ordinary Nigerian consumer.

A Delicate Balancing Act for Government

While the Nigerian government might benefit from increased oil export earnings, analysts caution that this windfall could be offset by inflation and social unrest if not carefully managed.

“More revenue for the Federal Government and states—if they spend it in a frugal way,” Pratt advised.

However, Nigeria’s fuel import bill already stood at N1.76 trillion in Q1 2025, according to the National Bureau of Statistics (NBS). In a climate of foreign exchange scarcity and fiscal pressure, another spike in the fuel import bill could undermine any revenue gains from crude exports.

More importantly, another increase in fuel pump prices could spark public anger, especially amid ongoing economic hardship, rising food costs, and elevated inflation, which stood at over 33% year-on-year as of April 2025, per official data.

FX Volatility: A Compounding Factor

The naira’s instability remains a critical multiplier of economic pain. The Central Bank of Nigeria (CBN) has taken steps in recent months to stabilize the exchange rate, but pressures persist.

Since petroleum products are purchased in US dollars, a weaker naira automatically raises the local cost of imports, making Nigeria particularly sensitive to global shocks.

“Without a stable exchange rate, the fuel price impact becomes even more pronounced,” said Pratt.

The challenge, therefore, lies in maintaining FX stability while managing rising oil import costs and sustaining social programs to mitigate the impact on vulnerable populations.

What Comes Next?

Several factors will influence how the situation unfolds in Nigeria over the coming weeks:

1. Further Escalation in the Middle East: If Israel-Iran hostilities intensify or disrupt oil shipping routes like the Strait of Hormuz, oil prices could surge even higher.

2. Exchange Rate Movements: A weakening naira could magnify the impact of crude price increases on domestic fuel costs.

3. Government Intervention: While subsidies have been removed, the government may consider temporary relief measures—such as tax waivers or FX support for importers—to cushion the blow.

4. Inflationary Feedback: Rising fuel prices tend to inflate transportation and logistics costs, which can then cascade into food and commodity prices—further worsening living conditions.

Final Thoughts: Fragile Gains at Risk

The unfolding Middle East crisis serves as a stark reminder of Nigeria’s fragile energy economics. Even as oil revenues offer fiscal relief, the inability to refine crude domestically leaves the country vulnerable to every geopolitical tremor.

Without significant investments in local refining, FX stability, and social safety nets, Nigerians could once again find themselves paying more at the pump—and in the market—for a crisis happening thousands of kilometers away.

With Brent crude now hovering well above pre-strike levels and uncertainty clouding the outlook, Nigerians brace for the ripple effects of a conflict they did not start—but cannot ignore.