Manny Ita –
Escalating tensions between the United States, Israel and Iran following coordinated military strikes on February 28 have begun influencing global financial markets, with analysts warning that the resulting oil price surge could significantly affect Nigeria’s equity market performance.
The latest escalation triggered immediate reactions in global crude markets, even before military exchanges intensified, as investors priced in geopolitical risks linked to potential disruptions in energy supply routes. Brent crude, the European benchmark, climbed to about $73 per barrel ahead of the weekend close, marking its highest level in six months after gaining more than two per cent in a single trading session, while West Texas Intermediate rose above $67 per barrel.
Market analysts attribute the rally to a growing geopolitical risk premium amid concerns surrounding the Strait of Hormuz, a strategic maritime corridor responsible for roughly one-fifth of global oil flows. Analysts noted that the sustainability of the price increase would depend largely on whether hostilities remain contained or expand to threaten shipping infrastructure and regional oil production.
For Nigerian investors, however, analysts stressed that the implications extend beyond crude prices alone, warning that geopolitical shocks often trigger global “risk-off” sentiment capable of driving foreign capital away from emerging markets such as Nigeria regardless of oil revenue gains.
They noted that sustained higher crude prices could strengthen Nigeria’s fiscal position by improving government revenues and external reserves, potentially supporting macroeconomic stability if managed prudently, although sectoral impacts within the stock market are expected to vary widely.
Upstream oil producers, including Seplat Energy and Aradel Holdings, are projected to benefit from prolonged elevated oil prices. Analysts observed that both firms recorded strong earnings growth in 2025 driven mainly by production volumes rather than price increases, with realised oil prices averaging around $70 per barrel. Should Brent crude sustain levels above $80 to $85, realised revenues could rise significantly, as relatively stable production costs allow incremental income to flow directly into operating profit and free cash flow.
According to market commentary, stronger cash generation would enhance balance sheets, accelerate debt reduction, improve dividend capacity and support higher equity valuations, potentially attracting renewed investor inflows into Nigeria’s oil and gas equities. Shares of Seplat have already gained 39 per cent this year, pushing year-to-date returns to 62 per cent, while Aradel has risen 36 per cent, lifting its year-to-date performance to 57 per cent.
However, analysts warned that downstream operators such as Eterna Plc and Conoil Plc could face margin pressure as higher crude prices increase fuel procurement costs. They noted that unless retail fuel prices adjust quickly, already thin margins may narrow further, raising earnings risks within the downstream segment.
The consumer goods sector is expected to experience a more complex impact. Companies including Nestlé Nigeria and Nigerian Breweries had only recently returned to profitability following earlier pressures from currency devaluation and elevated borrowing costs. Analysts cautioned that sustained oil-driven inflation could reverse recent gains as diesel, logistics and transportation expenses typically rise alongside crude prices.
While firms may attempt to transfer increased costs to consumers through higher product pricing, analysts warned that demand remains fragile following recent inflation shocks, noting that aggressive price adjustments could weaken sales volumes despite revenue growth.
Banking stocks are expected to face indirect but significant effects depending on macroeconomic outcomes. Analysts explained that stronger oil prices could improve Nigeria’s foreign exchange position and reduce currency risks, thereby supporting investor confidence in financial institutions. However, renewed inflationary pressures could prompt monetary authorities to delay interest rate reductions, sustaining higher borrowing costs across the economy.
Higher interest rates may support banks’ net interest margins in the short term but could weaken loan growth and asset quality if businesses in manufacturing, consumer goods and transportation sectors struggle under rising operational costs.
Analysts emphasised that because banking stocks carry substantial weight within the Nigerian Exchange’s All-Share Index, their performance will largely determine whether gains recorded in oil equities translate into broader market expansion.
Market observers concluded that the ultimate impact on Nigerian equities will depend on how long oil prices remain elevated. Analysts noted that if crude prices spike only briefly, markets may experience short-term volatility before stabilising, but warned that a prolonged period of higher oil prices lasting weeks or months could alter earnings expectations across multiple sectors, ultimately shaping the direction of Nigeria’s stock market in the months ahead.
