Why Middle East conflict could reshape Uganda’s economy

Global crises often unsettle markets. But they can also create openings for investors willing to take a longer view.

That was the message from analysts and investment advisers during a webinar hosted by SBG Securities Uganda Limited on Wednesday, where economists said the escalating conflict in the Middle East may bring short-term volatility but could also create opportunities for disciplined investors and policymakers in Uganda.

“Such times can come with a lot of uncertainty,” said Grace Semakula, chief executive of SBG Securities Uganda Limited, the investment and brokerage arm of Stanbic Uganda Holdings Limited.

“But these are not times to panic. They are times to take a patient, long-term view and consistently allocate funds.”

Semakula said geopolitical disruptions often create moments when investors can reposition portfolios and identify emerging opportunities, provided they remain focused on long-term fundamentals rather than short-term noise.

Uganda enters this uncertain period from a position of relative strength. Inflation has remained subdued, economic growth has stayed robust, and exports, particularly gold and coffee, have expanded significantly over the past year.

Yet economists warn that global conflict could still affect the economy, especially if the disruption becomes prolonged.

“We might see a protracted conflict,” said Christopher Legilisho, an economist at the Standard Bank Group. “That could weigh on global growth and create spillovers to different countries, including Uganda.”

Central banks are also becoming cautious. For much of 2024 and early 2025, central banks around the world prepared to ease monetary policy as inflationary pressures started to decline.

That outlook may now change. Rising geopolitical tensions have increased the risk of higher oil prices and renewed inflationary pressure, forcing policymakers to reconsider their approach.

“Because of the conflict, we are starting to see expectations that inflationary pressures could return,” Legilisho said. “Central banks may become more cautious or preventative in their policy stance.”

Uganda’s central bank, the Bank of Uganda, has kept its benchmark policy rate steady at 9.75% since October 2024. If inflation rises, analysts say the bank could delay any rate cuts or even tighten policy.

Uganda’s trade links to the Middle East also expose it to possible disruptions, experts said.

Gold exports, now the country’s largest export earner, are heavily concentrated in that region. Uganda exports roughly $6 billion worth of gold each year, with about $5.2 billion going to the United Arab Emirates.

Any interruption to that trade route could temporarily affect exporters. “If producers are unable to ship gold to the UAE, refiners and exporters may struggle to find immediate alternative markets,” Legilisho said.

However, the disruption could also accelerate domestic policy plans. The Bank of Uganda has been preparing to launch a domestic gold purchase programme to strengthen foreign exchange reserves, a move that could gain urgency if export flows slow.

Energy markets add another layer of uncertainty.

Higher oil prices would increase Uganda’s import bill in the short term because the country still relies heavily on imported refined petroleum products, much of which come from the Middle East.

“You could see Uganda’s oil import requirements rise significantly if prices spike,” Legilisho said.

But the longer-term outlook may improve. Uganda expects first oil production from its petroleum sector later this year, which could gradually change the country’s trade balance.

Financial markets have already started reacting. The Ugandan shilling has weakened by about 3% since the conflict escalated, and analysts warn inflation could rise if energy prices increase further.

In a worst-case scenario, Legilisho estimates inflation could reach about 8.3%, which may force the central bank to raise interest rates. Higher borrowing costs would slow credit growth and could reduce economic expansion.

Remittances could also face pressure. Uganda receives significant inflows from citizens working in the Middle East, and any regional disruption could affect those earnings.

Still, the scale of the impact will depend on how long the conflict lasts.

“If the crisis is resolved within a month, the economic impact would likely be limited,” Legilisho said. “But if it continues for several months, the pressures on growth and inflation could become more significant.”

For investment advisers, the key message is that volatility should be managed rather than feared.

“Even through crisis, there are significant opportunities to explore,” Semakula said. “Our role as an investment partner is to help clients see beyond the immediate noise and make informed, long-term decisions.”

SBG Securities Uganda Limited ended 2025 with more than UGX 540 billion in assets under management and added more than 4,000 new clients during the year.

The firm was also recognised by the Capital Markets Authority as Collective Investment Scheme Manager of the Year.

For Uganda’s economy, the coming months may test its resilience. But as Semakula suggested, periods of uncertainty can also reward those prepared to look beyond the immediate horizon.