US–Israeli–Iran Tension: What it means for Nigerian stocks

The United States and Israel on Saturday, February 28, 2026, launched direct strikes on Iran, marking a fresh escalation in Middle East tensions after Iran retaliated with missile and drone attacks.

One immediate headwind from this escalation is its impact on the global oil market.

Even before the strikes, oil prices had begun reacting.

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On Friday, ahead of the weekend close, Brent crude; the European benchmark; climbed to $73 per barrel, its highest level in six months, rising more than 2% in a single session.

West Texas Intermediate (WTI), the U.S. benchmark, followed a similar trajectory, rising above $67 per barrel.

Analysts believe the rally reflects a geopolitical risk premium in crude markets, as traders price in the supply disruption around the Strait of Hormuz; a chokepoint responsible for roughly one-fifth of global oil flows.

How long that premium remains will depend largely on the duration of the tension. If the conflict remains contained, oil may hover within current ranges. If it escalates and continues to threaten shipping routes and production infrastructure, prices could reset materially higher.

For Nigerian investors, however, the question is how does this tension affect the Nigerian stock market?

Before breaking down sector by sector, it is important to note that the impact will not be determined by oil prices alone.

Geopolitical shocks often trigger global “risk-off” shifts. If foreign investors reduce exposure to emerging markets, the NGX could experience volatility regardless of oil gains.

Fiscal dynamics also matter. Sustained higher crude prices could improve government revenue and external buffers, support macro stability if managed prudently.

But let us look through the sectors.

Oil and gas sector: Impact – Positive

For upstream producers such as Seplat Energy and Aradel Holdings, sustained higher crude prices are structurally positive.

In 2025, both companies delivered strong earnings growth largely driven by higher volumes rather than price gains.

• Their realised oil prices averaged around $70 per barrel. If Brent sustains levels above $80–85, realised prices would materially exceed last year’s averages.

Because upstream production costs are relatively stable, incremental revenue largely flows into operating profit and free cash flow.

• That strengthens balance sheets, accelerates deleveraging, improves dividend capacity, and supports higher equity valuations.

For investors, this means earnings upgrades are possible if elevated oil prices persist. The sector could attract renewed inflows, especially if foreign investors view Nigeria as a relative beneficiary of higher crude.

Already, these stocks have rallied strongly this year. Seplat gained 39%, pushing its year-to-date return to 62%, while Aradel rose 36%, lifting its YtD gain to 57%.

• That contrasts with their relatively muted 2025 performance, when Seplat was up just 1.29% YtD and Aradel 12%.

Importantly, that rally was earnings-driven, not tension-driven. The current escalation introduces a new potential catalyst. If oil remains elevated, the oil and gas index could extend gains and provide leadership for the broader All-Share Index (ASI).

However, the story is not uniform across the energy chain.

• Downstream operators such as Eterna and Conoil face the opposite dynamic. Higher crude prices increase procurement costs.

Unless retail fuel prices adjust quickly and fully, already thin margins could narrow further. For investors, that raises earnings risk and valuation pressure in the downstream segment.

**Consumer Goods:  **

The impact may be more complicated for consumer goods companies.

After suffering from naira devaluation and high interest rates in 2023 and 2024, the sector staged a strong comeback in 2025.

• Companies such as Nestlé Nigeria and Nigerian Breweries returned to profitability, supported by revenue growth, margin recovery, and lower finance costs.

However, a sustained escalation that keeps oil prices elevated could reopen inflation pressures just as the sector stabilised.

Diesel, transport, and input logistics costs tend to move in line with crude. If Brent pushes toward $90 or higher and stays there, operating costs will rise again, potentially eroding the margin gains recorded in 2025.

• Companies may attempt to pass those costs through higher prices. But consumer demand remains sensitive after recent inflation shocks. Aggressive price adjustments risk weakening volumes in an already fragile spending environment.

The consumer goods index has gained 9.9% year-to-date as of February. A prolonged oil-driven inflation cycle could slow down that momentum and limit further upside.

**Banking:  **

For banks, the impact of the tension is indirect but significant.

If oil prices remain elevated, Nigeria’s foreign exchange position improves. That reduces currency risk and supports overall macro confidence, which is positive for bank valuations.

However, the bigger question is inflation.

If higher crude prices push domestic fuel and transport costs upward, inflation could re-accelerate. In that case, the Central Bank may slow or pause further rate cuts.

• Higher rates can support banks’ net interest margins in the short term. But they also increase borrowing costs across the economy.
• Manufacturing, consumer goods, and transport businesses, already sensitive to cost pressures, could see weaker earnings.
• That raises the risk of slower loan growth and potential asset quality deterioration over time.

In practical terms, bank shares may remain stable if oil strengthens Nigeria’s external position without triggering another inflation spike.

• But if higher oil prices reignite inflation and pressure real-sector earnings, the sector could face renewed caution from investors.

Because banks carry significant weight in the All-Share Index, their direction will influence whether gains in oil stocks translate into broader market strength.

**Bottom line **

Right now, the situation is fresh. Oil has reacted, but we don’t yet know whether prices will stay high or fall back; and that makes all the difference.

• If oil only spikes briefly, the market may just see some short-term volatility and then stabilise.
• But if oil stays high for weeks or months, then earnings expectations across sectors will begin to change, and that’s when the real market impact happens.

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