On February 28, 2026, Donald Trump approved military strikes on Iran, based on the charges against the government for brutally suppressing its own people, funding proxies across the Middle East for decades, and was, according to Washington, quietly building a nuclear weapon. Trump did not just want the programme dismantled. He wanted the government gone.
Iran had other ideas. Its response spread across the region fast, hitting US-based military bases across the UAE, Bahrain, Qatar, and Kuwait within days. Every country on this list has US forces, US interests, or both. That is not a coincidence, but a message.
By the next morning, oil was trading above $80 a barrel. The dollar index hit its highest level in five weeks. Gold climbed past $5,400. Stock markets opened red across Asia and Europe. In trading rooms across the world, one question was already running through every financial desk: how long will this last?
What Happens to Currencies When Oil Goes to War?
When a genuine geopolitical shock hits global markets, investors do two things reflexively. They sell risk and buy safety.
Safety, in financial market terms, means the US dollar, Japanese yen, Swiss franc, gold, and US Treasury bonds. Risk means equities, emerging market currencies, commodities tied to growth, and anything sensitive to global trade flows.
The US dollar strengthened against other major currencies, benefiting from investors seeking out safe havens. The US dollar index gained 0.95%, erasing its losses for this year and trading at its highest level in five weeks.
For emerging market currencies, the playbook is brutal and familiar. Capital rushes out toward safety. FX liquidity dries up, and import costs rise in local-currency terms even before global prices move.
Prolonged disruptions to shipping routes, higher insurance costs and supply chain rerouting could amplify inflationary pressures beyond the direct effect of higher gasoline prices.
Nigeria’s Position: Complicated by Design
Nigeria sits in an unusual position in this conflict, and understanding it requires holding two contradictory truths simultaneously.
On paper, Nigeria should benefit because higher oil prices mean higher export revenues, given that crude oil accounts for over 85% of export earnings and about half of government revenue. The country’s 2026 budget was passed on a conservative benchmark of $64.85 per barrel. With Brent now tracking above $73, every additional dollar translates into billions of extra naira in monthly revenue. The 2026 budget already carries a deficit of N23.85 trillion. A sustained oil price surge could narrow that deficit meaningfully and give the government room to fund capital projects and stabilise the exchange rate.
However, Nigeria has a long history of failing to collect the windfall it is theoretically owed.
The country produced approximately 1.47 million barrels per day in January 2026, well below its OPEC quota of 1.5 million barrels per day. Oil theft and pipeline vandalism have been bleeding production targets for years. A global supply crunch only benefits a producer that can actually get oil to market. If Nigeria cannot ramp up output while Gulf producers are sidelined, the opportunity will be lost without the country capturing it. The revenue projection assumes production. The production numbers do not always cooperate.
What Does This Mean for The Naira Specifically?
The answer depends on which force wins: the dollar inflows from higher oil revenues or the capital outflows from global risk aversion.
Higher oil prices typically strengthen Nigeria’s current account balance and improve foreign exchange liquidity. This could reduce short-term pressure on the naira and reinforce investor confidence. Nigeria’s external reserves are now above $50 billion, a buffer that gives the CBN genuine firepower to defend the currency against speculative pressure if needed. If the conflict is short-lived and Nigeria captures higher oil revenues without a prolonged global growth downturn, the naira could actually come out of this period stronger.
But geopolitical instability also triggers global risk aversion. During periods of uncertainty, capital tends to migrate toward safe-haven assets such as US Treasury securities and gold. Emerging markets frequently experience portfolio outflows in such episodes. Given Nigeria’s relatively shallow capital market and sensitivity to foreign portfolio investment, volatility in global financial conditions could offset part of the FX gains from higher oil prices.
This is the tightrope. A short, contained conflict with sustained oil prices above $80 is positive for Nigeria’s fiscal position and the naira. A prolonged war that dampens global growth, triggers sustained portfolio outflows from emerging markets, and pushes fuel prices well beyond N1,000 per litre is a different story. Medium-term risks include the possibility that prolonged conflict dampens global growth, reducing oil demand and causing price corrections.
The structural problem that makes Nigeria perpetually vulnerable in scenarios like this has not changed. Production capacity that consistently undershoots targets due to oil theft and pipeline vandalism. A downstream sector that is only partially insulated from global price movements despite the Dangote Refinery. A capital market is shallow enough that foreign portfolio shifts create outsized FX effects. The conflict did not create these vulnerabilities. It is just illuminating them again.
What Nigerian Businesses Need to Understand Right Now
If you are running a Nigerian business with international payment exposure, this is not an abstract geopolitical event. It is a live operational risk.
FX volatility is going to be elevated for weeks, possibly months. The conflict’s duration is the single biggest variable. Trump has said it could last four to five weeks. Markets that priced in a short campaign are now recalibrating. Every week of sustained conflict means more pressure on shipping routes, more upward pressure on oil prices, more dollar strength, and more volatility in emerging-market FX. The naira’s recent stability was built on improved CBN reserves and tighter monetary policy. Those buffers help, but they do not neutralise geopolitical shocks.
Your import costs are rising whether or not your direct suppliers are in the Middle East. Global shipping insurance costs have spiked. Freight rerouting is adding time and cost to supply chains everywhere. The corridor disruption in the Strait of Hormuz affects oil-dependent logistics globally, not just in the Gulf. If you are importing goods from China, Europe, or the US, the landed cost of those goods is already moving.
Timing your international payments matters more right now. On volatile days, the difference between paying at the open and paying at the close can be significant. The businesses that can execute cross-border payments instantly, not after two to three business days of settlement delays, during which the rate has moved.
What Comes Next?
The honest answer is that nobody knows exactly how this conflict will resolve. The variables are genuinely hard to model: Trump’s political appetite for sustained military engagement, Iran’s leadership structure after Khamenei’s death, whether Gulf state infrastructure takes significant damage, and how long OPEC+ production increases can compensate for Hormuz disruption.
What markets can tolerate is a spike. What they cannot tolerate is prolonged uncertainty over trade flows through the Strait of Hormuz.
The base case among most analysts is a conflict lasting several more weeks, with partial de-escalation emerging from coercive diplomacy rather than full military resolution. Under that scenario, oil stays elevated, the dollar remains strong, emerging market currencies, including the naira, face continued pressure, and global inflation expectations stay higher for longer than central banks would prefer.
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