By Cliff Bakashaba, Head of Investments at Jubilee Asset Management Limited
The recent ceasefire framework in the Middle East has given markets something they badly wanted, a reason to breathe. Oil prices have eased from their highs. Investors have responded positively. And after months of conflict involving Iran, Israel and the United States, it is understandable that many would like to believe the worst is behind us.
But for investors, especially those responsible for long term savings and policyholder funds, relief is not the same thing as safety.
The real effects of a conflict like this do not end when the headlines soften. They move quietly through the system, through fuel prices, freight costs, inflation, currencies, interest rates and borrowing costs. By the time those pressures show up in household budgets, company earnings or bond markets, the diplomatic story has often moved on.
That matters greatly for African economies. Much of Africa experiences global shocks through transmission. A conflict far away becomes more expensive for fuel at home. Higher fuel costs raise transport costs. Transport costs feed into food prices and the broader cost of living.
Pressure on import bills increases demand for US Dollars, which can weaken local currencies. Once inflation and exchange rate pressure build together, central banks have less room to support growth.
That is when a geopolitical event becomes an everyday economic one. From an insurance industry asset perspective, this matters because the sector is built around long-term obligations. Insurers and asset managers are not just reacting to short-term market moves. They are trying to preserve value, manage liquidity, protect policyholder funds and invest prudently in a world where shocks often last longer than expected.
That is why the Middle East conflict still matters, even in a period of de-escalation.
At the height of the disruption, oil rose from roughly 72 US Dollars to as high as 120 US Dollars per barrel. LNG prices also climbed sharply.
More than 20 percent of global oil shipments move through the affected region. These are not minor shifts. They are large enough to affect inflation expectations globally and to delay the interest rate relief many markets have been hoping for.
For African economies that import energy, the pressure is immediate. Higher oil prices widen import bills and increase demand for hard currency. That can weaken local currencies and make imported inflation harder to contain. For households, the squeeze is felt in transport, food and utilities. For businesses, it shows up in tighter margins and more cautious investment decisions. For investors, it creates a more difficult environment for both bonds and equities.
Kenya offers a useful example. Before the conflict, inflation had been easing and there was growing confidence that pressure on households and markets might begin to soften. But shocks like this interrupt that path. Jubilee Asset Management’s scenario analysis showed that under a prolonged disruption, Kenya’s inflation could move from a 4.3 percent pre shock baseline to between 6.5 percent and 8.0 percent in the base case, while the shilling could weaken by 5 percent to 10 percent.
Those changes are not abstract. They affect the price of government borrowing, the value of bond portfolios, the resilience of listed companies and the purchasing power of ordinary families.
This is why the industry should be cautious about treating a ceasefire as a clean end to the risk. Even when fighting cools, the financial aftereffects can linger. Shipping confidence does not return overnight. Freight and insurance costs can remain elevated. Inflation can stay sticky. And if inflation stays sticky, interest rates may remain higher for longer than markets would like.
The lesson here, Africa should not be treated as one market in moments like this.
The same shock can produce very different outcomes depending on whether a country imports or exports energy, how much foreign exchange cover it has, and how exposed consumers are to food and transport inflation. Some economies may benefit from higher commodity prices. Others will feel the strain through weaker currencies, tighter financing conditions and slower household demand. That is why selectivity matters. Broad narratives are easy. Sound investment judgment is harder.
For the insurance and asset management industry, the lesson is not to panic. It is to stay disciplined. This is a time to pay close attention to inflation risk, currency exposure, duration, liquidity and balance sheet strength. It is a time to favour resilience over excitement. It is also a reminder that protecting long term savings is often less about chasing the next rally and more about understanding where pressure is building beneath the surface.
The ceasefire is welcome. Everyone should hope it holds. But investors, insurers and long-term savers should look beyond immediate relief. The real test is whether oil, inflation, currencies and rates are returning to a more stable path.
Photo credit: Jubilee Asset Management Limited.
Source: Jubilee Asset Management Limited.
