The Iran war is hurting—and helping—North African economies

Algeria and Libya stand to gain from higher oil prices, but energy importers Morocco, Tunisia and Egypt are desperate for the war to end

Al Majalla

The Iran war is hurting—and helping—North African economies

Mohamed Sharki

last update on 02 Apr 2026

Ever since the US and Israel began bombing Iran on 28 February 2026, there have been economic ripple effects, not least in terms of energy. Iran retaliated against the Americans and Israelis but also against the Gulf states, many of whom host US military bases, and some of whom normalised relations with Israel in 2020.

Among the regions hit by the economic fallout is North Africa, which includes the great trading nations that line the southern half of the Mediterranean Sea and rely more on shipping than others. Yet the cost of maritime shipping is now $400,000 per vessel per day, at least double the pre-war figure, according to Rodolphe Saadé, head of the French shipping group CMA CGM.

Sources at Tangier Med, a giant port complex and industrial logistics hub in northern Morocco, told Al Majalla that the war had led to additional charges on goods arriving from the Gulf, as well as from Egypt, Cyprus, Israel, Iraq, Jordan, Yemen, Djibouti, Türkiye, and other countries. The cost of a 20-foot container has risen from $2,300 to $3,300, while a 40-foot container has climbed from $2,900 to $4,600, excluding insurance and logistics costs.

The countries of the Maghreb and West Africa depend on Tangier Med for imports of consumer goods, industrial inputs, and energy supplies. Al-Ajlawi Al-Mousawi, professor of African Studies at Mohammed V University, told Al Majalla that the world was looking anew at maritime chokepoints such as the Strait of Hormuz, the Gulf of Aden, the Bab el-Mandeb Strait, and the Horn of Africa. “So long as these passages are not secured for international navigation, the world economy will remain exposed to regional tensions and at the mercy of extremist groups,” he said.

AFP — A Sonatrach facility in Algeria which produces 60,000 barrels of crude oil/day and nearly 2 million m3 of natural gas.

Winners and losers

Oil-exporting countries such as Algeria and Libya stand to gain from higher energy prices. Energy importers such as Morocco, Egypt, and Tunisia, by contrast, are desperate to see the war end, to lower prices, and to restore trade, which relies on freedom of navigation.

Rabat and Cairo support the Gulf states in standing up to Iranian aggression directed at economic, tourist, and residential facilities. Morocco actually severed relations with Iran in 2018, after Rabat accused Iran of arming the separatist Polisario Front in Western Sahara, over which Morocco claims sovereignty. For its part, Algeria seems caught in the middle, given its strong ties with Iran and its need to balance relations with the US and Gulf states.

Before the war, the International Monetary Fund (IMF) issued optimistic 2026 forecasts for the Maghreb's economies, buoyed by a recovery in agriculture, the return of seasonal rains, a revival in tourism, stronger domestic demand, increased foreign direct investment (FDI) inflows, and rising non-oil exports. The Fund even said that gross domestic product (GDP) across the southern Mediterranean could reach $1tn for the first time in history, but the war may have changed things.

Morocco

Morocco’s central bank had forecast growth of 5.6%, inflation of 0.8%, and a budget deficit of 3.5% by the end of 2026. The Foreign Exchange Office reported that net FDI inflows reached roughly $3bn in 2025, up 74% compared with 2024. Tourism revenues climbed to $14.7bn, while remittances from Moroccans living abroad reached $13bn by the end of 2025 (up from $12.7bn in 2024). This helped Moody’s assign Morocco a BA1 credit rating with a positive outlook.

There are clouds on the horizon, however. Morocco's trade deficit has now reached around $38.7bn, up 15.8% year on year. It also imported about $10bn worth of fuel last year (including 41,000 barrels from Spain, 40,000 from Russia, 36,000 from Saudi Arabia, and 26,000 from the United States) and consumes 300,000 barrels per day (bpd). It also imported $1.2bn of LNG from the United States, $414mn from Spain, and $65mn from the UK.

Unprocessed phosphates at OCP's Marka plant, near Laayoune, Western Sahara.

If prices keep rising, so will Morocco’s energy bill, pushing inflation upwards. At the same time, higher fertiliser prices are helping, given that Morocco is one of the world’s leading exporters, particularly in phosphate fertilisers (Morocco holds around 70% of global phosphate reserves, which are so crucial for agricultural use). These exports reached $10.7bn in 2025 and may offset part of the cost of the energy bill.

Morocco is racing to build the $5.6bn Nador West Med, a deep-water port on the Mediterranean coast. Its berth will handle up to 5 million containers (with scope to expand to 12 million) and process up to 35 million tonnes of imported goods annually. If everything goes to plan, it is due to begin operations at the end of this year.

If prices keep rising, so will Morocco's energy bill, pushing inflation upwards. At the same time, higher fertiliser prices are helping.

Crucially, it will include the country's first LNG-receiving terminal, which could be ready in just over a year's time, says Mohamed Jamal Benjelloun, chief executive of the state-owned Nador West Med company. The terminal's maximum capacity is expected to reach 175,000 cubic metres, allowing for the storage of 25 million tonnes of LNG. The Gulf states are reportedly looking at the port as an energy reserve hub. Other big projects include the construction of Africa's largest oil refinery, the fruit of Saudi-Moroccan cooperation.

Omar Cherkaoui, professor of constitutional law at Mohammedia University, told Al Majalla that the military targeting of Gulf states has accelerated these key infrastructure projects, pointing to the existing security, military, political, and economic cooperation between Morocco and the Gulf Cooperation Council states.

AFP — The In Amenas gas field, jointly operated by British oil giant BP and Norway's Statoil in eastern Algeria near the Libyan border. Hydrocarbons have kept the dollars coming in.

Algeria

Algeria sees war in the Gulf as an opportunity to strengthen its position in European gas markets, reduce its trade deficit, and boost revenues. On oil, production has increased by 6,000 barrels per day (bpd), raising exports to 980,000 bpd to meet European demand. Algeria currently produces less than 1% of global oil output and accounts for 3% of natural gas production.

Unfortunately for Algeria, it has long-term supply contracts with European partners, leaving it only limited room to influence prices. Its budget was burdened by a $62bn deficit in 2025 and is estimated at $74bn this year. Revenues are expected to be $61.6bn in 2026, $63bn in 2027, and $64.7bn in 2028. Oil and gas account for around 90% of Algeria's exports and 60% of the treasury income.

The World Bank expects growth of between 3.3 and 3.7%, driven by higher oil prices and the return of rainfall, but Algeria will still have to contend with growing American dominance in European energy markets and the slow expected return of Russian gas

Egypt has implemented austerity measures, raising fuel prices and curbing spending, and the Egyptian pound has fallen sharply against the dollar

Libya and Tunisia

Although Libya holds Africa's largest oil reserves (around 48 billion barrels), political instability continues to hobble the oil industry, with production held hostage to spats between rival governments in the east and the west. It produces around 1.3 million bpd, although output fluctuates. In the domestic market, there are chronic fuel shortages, with oil terminals and production fields repeatedly closed.

For Tunisia, the timing of the war in Iran could hardly be worse for its economy. Difficulties stemming from the pandemic (2020) and the Ukraine war (2022) have been exacerbated by an unprecedented rise in public borrowing over the past three years, after President Kais Saied rejected an IMF offer of borrowing due to its terms and conditions.

This year, the Tunisian state is set to borrow $6.4bn from the local financial market, including $3.7bn from the central bank at 0% interest. Public debt servicing is estimated at 78.5% of GDP. Although tourism, agriculture, and services have picked up, the economic challenges remain severe. According to analysts, every dollar increase in the price of a barrel of oil above the assumed 2026 price of $69.3 adds $54mn to the state budget. At the time of writing, a barrel of Brent crude was $111.

Reuters — A container ship transits the Suez Canal on 15 February 2022.

Egypt

Among the Egyptians' war fears is that its principal sources of hard currency—Suez Canal transit fees, tourism, and remittances—may fall as a result. Although foreign currency reserves rose to a record $52.75bn in February 2026, experts believe available alternatives will not be enough to offset these losses.

For its part, the government has implemented austerity measures, raising fuel prices and curbing spending. It is also seeking investment and accelerating external financing. The Egyptian pound has also fallen sharply against the dollar since the outbreak of the war. Cairo's hopes centre on partial remedies such as revitalising ports, transit trade, and export growth (especially in agriculture) to boost dollar inflows.

Analysts think that while this may soften the blow, it will not fully offset the revenue decline. Prime Minister Mostafa Madbouly said, "A clear challenge still lies before us, namely the inability to determine any timeframe for the end of the war. This is what compounds its economic effects."

Relations between Egypt and Israel soured over Gaza, with Tel Aviv suspending gas supplies to Egypt indefinitely. This cut around 1.1 billion cubic feet a day, adding further strain to Egypt's energy sector. Egyptian imports of Israeli gas rose by about 8% in the fiscal year ending in June 2025, reaching 344 billion cubic feet, up from 319 billion cubic feet in the previous fiscal year.

To address the shortfall, Egypt has begun rescheduling LNG shipments and increasing its reliance on them, while also sharply expanding the use of mazut (a thick, high-viscosity residue from crude oil distillation, commonly described as 'bottom-of-the-barrel' fuel) in power stations to secure supplies. The government has said that, despite these challenges, it will not resort to load shedding and that coordination among relevant authorities continues to safeguard electricity stability.

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