Ethiopia’s government has introduced emergency fuel subsidies aimed at protecting households and businesses from the sharp rise in global oil prices driven by escalating tensions in the Middle East.
International energy markets have been unsettled by disruptions around the Strait of Hormuz, a vital passage for global oil shipments. Roughly one-fifth of the world’s oil moves through the channel, and fears over its closure have pushed fuel prices higher, particularly for countries that rely heavily on imports.
In comments carried by state media, Finance Minister Ahmed Shide said authorities had expanded subsidy programmes to maintain relative stability in domestic fuel prices despite soaring international costs.
“To shield citizens from skyrocketing global prices, the government has significantly increased subsidies,” Shide said. He explained that diesel is currently being sold at 139.84 birr per litre, roughly $0.90, with the state covering about 98 birr, or around $0.63, through subsidies.
Disruptions affecting the Strait of Hormuz have contributed to a surge in global diesel prices. Petrol in Ethiopia is now priced at 132.18 birr per litre, approximately $0.85, supported by a government subsidy of about 73.56 birr, equivalent to around $0.47. These estimates are based on recent exchange rates where one Ethiopian birr trades at about $0.0064.
The government’s intervention highlights the scale of the pressure facing Ethiopia, which imports the majority of its refined petroleum products from Gulf suppliers, particularly the United Arab Emirates.
Data from the finance ministry shows that the international price of white diesel has surged from 53.68 birr, or roughly $0.34 per litre, to about 238.13 birr, close to $1.53 per litre, following the crisis. Officials also noted that additional fuel purchases are being arranged to prevent supply shortages.
The latest market disruption follows a military escalation after the United States and Israel carried out strikes targeting Iran’s nuclear and missile infrastructure. Iran responded by attacking American military facilities in Gulf countries and blocking shipping routes through the Strait of Hormuz.
The situation has raised concerns about a sustained energy shock that could affect emerging economies and African nations that depend heavily on imported fuel.
Geopolitical advisory firm Alpine Macro, which is affiliated with Oxford Economics, recently adjusted its forecast for the crisis. Analysts now believe the disruption could persist for up to two months, compared with earlier projections that expected it to last only a few weeks.
Donald Trump previously suggested that the military campaign targeting Iran might continue for about five weeks.
According to Dan Alamariu, chief geopolitical strategist at Alpine Macro, both sides have strong reasons to avoid a drawn-out confrontation. “For both sides, a long war is a huge political gamble,” he said, noting that political survival could ultimately limit the duration of the conflict.
Despite volatility in global energy markets, Ethiopia’s economy has continued to show resilience. The country recorded growth of 7.2 percent in 2023 and 8.1 percent in 2024, while expansion in 2025 is projected at around 7.2 percent.
Since coming to power in 2018, Prime Minister Abiy Ahmed has pursued a series of economic reforms aimed at liberalising the economy and opening sectors previously controlled by the state to foreign investment.
These reform efforts recently received backing from the International Monetary Fund, which approved a $261 million financial support package earlier this year, signalling confidence in Ethiopia’s fiscal and monetary policy direction.