This policy brief examines how the escalation of the United States–Israel–Iran conflict is affecting Uganda’s economy through global energy markets, trade and shipping disruptions, financial markets, capital flows and remittances. It assesses the resulting pressures on inflation, exchange rates, businesses, households and key productive sectors, while identifying policy options to strengthen Uganda’s resilience to external geopolitical shocks.
he escalation of the United States–Israel–Iran conflict has renewed concerns over the transmission of geopolitical shocks to emerging and developing economies. This policy brief by Uganda Development Bank examines Uganda’s exposure as a net importer of petroleum products and a trade-dependent economy, focusing on the effects of higher global oil prices, disruptions to international trade routes, financial market volatility and changes in capital and remittance flows.
The analysis explores how these external shocks affect domestic fuel prices, inflation, exchange-rate stability, transport and logistics, manufacturing, agriculture, financial conditions, household purchasing power and business activity. It highlights Uganda’s structural vulnerabilities, particularly its dependence on imported fuel, exposure to external trade routes and limited buffers against international price shocks.
The brief proposes three main policy responses: establishing a rule-based fuel price stabilisation and strategic commodity buffer system, prioritising access to foreign exchange for essential imports, and strengthening domestic production and import substitution. Together, these measures are intended to reduce the domestic transmission of external shocks and strengthen Uganda’s medium- and long-term economic resilience.
