Fitch Ratings says a prolonged Iran war leading to sustained high oil prices would likely have mixed impacts across African banking sectors.
According to the UK-based firm, the effects on bank ratings would largely depend on any implications for sovereign ratings, given the strong connections between sovereigns and banks across much of the continent.
“Changes in Fitch’s March Global Economic Outlook, which assumes a relatively short Iran conflict and oil prices averaging US$70/bbl [per barrels] over 2026, did not have a major impact on our macroeconomic projections for African countries where we cover banks. Consequently, we do not expect these changes to have bank rating implications”, it said.
It continued that an adverse conflict scenario involving the Strait of Hormuz remaining effectively closed until June and an average oil price of US$100 per barrel in 2026 remains a ratings-relevant credit risk, despite the recent ceasefire. This scenario would renew inflationary pressures in many African countries, particularly net hydrocarbon importers such as South Africa, Kenya, Morocco and Tunisia.
Fitch added that it would also pressure most countries in the West African Economic and Monetary Union (WAEMU), and could lead to fuel shortages in some areas.
Again, the worsening terms of trade and the potential for reduced foreign investor appetite could pressure some currencies. However, Morocco, Tunisia, WAEMU and the Economic and Monetary Community of Central Africa (CEMAC) have managed exchange rates that reduce depreciation risks.
Meanwhile, Fitch says central banks may respond by tightening monetary policy compared to their current baselines. This would likely weigh on economic growth, weaken borrowers’ repayment capacity and reduce loan growth prospects, increasing impaired loans ratios and loan impairment charges.
However, African banks under its coverage tend to have strong pre-impairment operating profit, which typically benefits from higher interest rates.
They also typically have healthy buffers over their respective minimum capital requirements, making them well-positioned to accommodate moderate currency depreciation and higher impaired loans ratios without an impact on ratings.
It concluded that external pressures on some hydrocarbon-importing countries could lead to a weakening of banks’ foreign-currency (FC) liquidity coverage, but this is unlikely to affect ratings given their generally adequate FC liquid assets. “African banks typically have limited external debt and therefore low direct exposure to a potential weakening of foreign investor sentiment”
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