Oil Prices Surge 7% as Israel-Iran Conflict Escalates – But It’s Not All Good News For Nigeria

Global oil prices surged on Friday, marking the sharpest single-day gain in over two years, as hostilities between Israel and Iran intensified. The spike was ignited by fears of a wider conflict in the Middle East that could severely disrupt oil exports from the region.

Brent crude jumped by 7 percent to close at $74.23 per barrel, after touching an intraday high of $78.50 — the strongest level seen since January 27. Similarly, U.S. West Texas Intermediate (WTI) surged to $72.98 per barrel, up $4.94 or 7.6 percent, after earlier reaching $77.62. Both benchmarks recorded their largest intraday gains since Russia’s 2022 invasion of Ukraine, which had caused a similar shock across global energy markets.

The price rally follows Israel’s targeted airstrikes on Iran’s nuclear facilities, ballistic missile factories, and senior military command infrastructure. Iran responded by launching missile attacks on Tel Aviv and parts of southern Israel. Both sides have vowed to continue their operations, signaling a prolonged conflict that investors worry could spill over into energy infrastructure or transport routes.

At the center of this concern is the Strait of Hormuz, a narrow maritime chokepoint that handles nearly 20 percent of global oil traffic — roughly 18 to 19 million barrels per day. Any threat to free passage through this waterway could significantly disrupt global oil supply chains.

Although Israeli strikes have so far avoided Iranian oil infrastructure, including Kharg Island, which is responsible for about 90 percent of Iran’s crude oil exports, analysts warn that any retaliatory attacks could follow an “energy-for-energy” pattern. This raises the specter of Iranian strikes on Gulf oil facilities or Israel’s allies in the region.

Not All Good News for Nigeria

For Nigeria, which relies heavily on oil exports, the sharp increase in oil prices offers an immediate fiscal upside. The country’s 2025 national budget is benchmarked at $75 per barrel. A sustained rally above this threshold could translate into higher revenues, potentially easing Nigeria’s budget deficit and enhancing foreign exchange reserves.

However, the development is far from good news for the general public. Nigeria, despite being an oil-producing country, depends heavily on imported petroleum products to meet domestic fuel demand. Although the recent activation of the Dangote Refinery has reduced the volume of petrol imports, the price of refined fuel in the country still responds to movements in international crude prices. The refinery sources crude from outside Nigerian shores.

Since commencing partial operations, the Dangote Refinery has helped ease petrol prices by selling at a lower rate compared to imported alternatives. In recent months, Dangote Industries slashed its ex-depot petrol price to around N840 per liter, making retail prices in Lagos fall to between N860 and N910. This was largely possible due to declining crude oil prices earlier in the year, which allowed the refinery to maintain relatively cheaper production costs.

But with crude now threatening to breach $100 per barrel amid escalating geopolitical tensions, the situation may soon reverse. Should oil prices remain elevated, the cost of refined products from Dangote Refinery will inevitably rise, erasing the gains made so far. This means Nigerians could begin to pay well over N1,000 per liter of petrol — a move that could trigger widespread discontent in a country already battling soaring inflation and meager wages.

Such a scenario also risks dragging the government back into subsidy territory. The administration of President Bola Tinubu removed petrol subsidies in mid-2023, citing unsustainable fiscal costs. However, if pump prices spiral out of control and public backlash intensifies, pressure may mount on the government to either intervene or reinstate some form of price support — an action that could further strain public finances.