Israel-Iran Tension: Economist Discusses Factors that May Deepen or Lessen Impact on Fuel Prices

As the geopolitical tensions between Israel and Iran escalate, some analysts, economists, and Ghana’s economic watchers are expressing concern over the potential impact, warning of possible fuel price shocks.

They are therefore urging the government to act swiftly to cushion the nation against global market volatility.

Economist at the University of Ghana, Professor William Baah-Boateng, maintains that while the direct impact on oil prices is yet to fully manifest, the evolving situation presents significant risks for Ghana since the country is heavily reliant on imported oil.

He was, however, quick to add that how the escalating geopolitical tensions will affect Ghana’s economy depends on several factors. Some these factors are external while others are internal.

The economist cited that the year-long conflict between Israel and Hamas has had a limited impact on global oil prices due to several factors.  However, with Iran now actively involved, the situation could quickly change.

“As a net importer of oil, a country that is a net importer of oil, anytime there is a challenge in the Middle East, it affects oil prices, and we face some kind of challenge. But as to whether it is going to continue will depend on a number of factors,” Prof. Baah Boateng said in an Accra-based JoyNews interview monitored by The High Street Journal.

According to Prof. Baah-Boateng, three key variables will determine whether Ghana’s economy will feel the pinch at the pump or not.

 The Duration of the Conflict

If hostilities between Israel and Iran escalate or become protracted, global oil supply chains could be disrupted, driving up crude prices.

“It depends on how long this escalation of war in the Middle East will continue. Remember that Israel and Gaza have been fighting for more than one year. I think about one and a half years. It hasn’t actually affected oil prices. But now Iran has been brought in. I think it will have some kind of effect,” he indicated.

OPEC’s Response

The economist anticipates that should the conflict suppress production in Iran and neighboring oil producers, the world will look to other OPEC members like Saudi Arabia to step in.

Prof. Baah Boateng expects that if Iran’s supply drops, Saudi Arabia and others might compensate with increased supply. However, such decisions are often laced with politics and market calculations, adding another layer of uncertainty.

He said, “It also depends on how the OPEC countries will react. So if indeed it is going to bring down oil production from Iran and other countries, we expect Saudi Arabia and others to also increase their supply. So it depends on how members of the OPEC group will react.”

Ghana’s Economic Preparedness

The factor is the only internal condition, and perhaps the most decisive factor lies at home. Prof. Baah-Boateng believes the extent to which Ghana will suffer from global fuel price volatility hinges on the government’s ability to plan ahead.

 He strongly recommended that the Ministry of Finance incorporate potential oil price shocks into the next budget review.

“The Minister of Finance should take this risk into account so we can know whether we are prepared to withstand what is coming,” he warned.

The Bigger Picture

The concern is not just about fuel. Rising oil prices can spark a chain reaction that can trickle into higher transportation costs, inflation, and broader economic instability. For a country still recovering from macroeconomic shocks and fiscal tightening, a sustained oil price surge could unravel recent gains.

Already, some civil society groups and industry analysts such as COPEC are calling on the government to invest in fuel storage infrastructure, expand refinery capacity, and adopt forward-looking fiscal policies that anticipate external shocks.

How the government reacts today will determine the impact of the tensions tomorrow.

Read More