Energy price surge to worsen Kenya's inflation - World Bank

A sharp surge in global energy prices triggered by Middle East tensions is set to deepen inflationary pressures in Kenya.

The lender is cautions against blanket subsidies and instead deploy targeted relief for vulnerable groups while accelerating a transition to renewable energy.

Brian Ngugi, nairobi

The World Bank warned on Tuesday that Kenya and other developing economies face a prolonged cost-of-living squeeze from a 24 per cent surge in energy prices  driven by the Middle East war, urging governments to shield the poorest households through targeted support while accelerating a shift to renewable energy. 

“The war is hitting the global economy in cumulative waves: First, through higher energy prices, then higher food prices and finally, higher inflation, which will push up interest rates and make debt even more expensive,” Indermit Gill, the World Bank’s Chief Economist, said in the latest Commodity Markets Outlook. “The poorest people, who spend the highest share of their income on food and fuels, will be hit the hardest.” 

The report, released in Washington, projects overall commodity prices will rise by 16 per cent in 2026, the steepest climb since the 2022 invasion of Ukraine.  

Kenya’s inflation accelerated to 4.4 per cent in March, up from 4.3 per cent in February, driven by rising food and fuel costs, according to Kenya National Bureau of Statistics (KNBS) data. 
The statistics bureau is set to release April’s figures in the coming days, with Kenyans already confronting a worsening cost‑of‑living squeeze, should the trend continue. 

The World Bank noted that attacks on energy infrastructure and shipping disruptions in the Strait of Hormuz, which handles about 35 per cent of global seaborne crude oil trade, have triggered the largest oil supply shock on record, cutting global supply by 10 million barrels per day. 

For Kenya, a net oil importer already witnessing inflationary pressures and fuel price hikes, the shock threatens to deepen a cost-of-living squeeze.  

Brent crude is forecast to average $86 (Sh11,094) a barrel in 2026, up from $69 (Sh8,901) last year, though prices could reach $115 (Sh14,835) if hostilities escalate. 

The World Bank however stressed that broad, untargeted fiscal support, such as blanket fuel subsidies, would distort markets and erode fiscal buffers. Instead, it called for rapid, temporary assistance focused on the most vulnerable. 

“Governments must resist the temptation of broad, untargeted fiscal support measures. Instead, they should focus on rapid, temporary support targeted to the most vulnerable households,” said Ayhan Kose, the Bank’s Deputy Chief Economist.

The report also made a direct appeal for energy-importing nations like Kenya to accelerate renewable energy adoption.  

“The declining costs of renewable energy technologies and storage solutions reinforce the case for expanding renewable electricity generation, helping to reduce geopolitical vulnerability as well as carbon emissions,” the Bank said.  

“When energy shocks occur, well-designed fuel pricing frameworks and targeted support for vulnerable households can help limit the pass-through of oil price spikes to domestic inflation and activity.” 

Fertiliser prices are projected to jump 31 per cent in 2026, driven by a 60 per cent rise in urea costs. 

That threatens Kenya’s tea, maize, and horticulture farmers, eroding crop yields and incomes. The World Food Programme warned that prolonged conflict could push up to 45 million more people globally into acute food insecurity. 

In developing economies, inflation is now projected to average 5.1 per cent in 2026, a full percentage point above pre-war forecasts, while growth is seen slowing to 3.6 per cent , a 0.4-point cut since January. 

For Kenyan households already grappling with higher transport and food costs, the Bank cautioned that without swift, targeted relief and a decisive move away from fossil fuels, the crisis will only deepen. “War is development in reverse,” Gill said.