Ruto's fresh headache: Houthi Red Sea blockade sends fuel import costs soaring

President William Ruto’s government is staring at a fresh political and economic headache just under 13 months to the next polls, after global crude prices surged past $112 (Sh12,500) per barrel, driven by the rapid expansion of the Middle East conflict and mounting fears of a full-blown regional war before receding to $88 (Sh11,550) yesterday.

All indications now point to the United States preparing for expanded military engagement with Iran amid reports of a significant American military build-up and troops placed on readiness for Gulf deployment — signalling that Washington is readying for a longer-term conflict.

The Middle East conflict took a worse turn after Houthi rebels — an Iran-backed militant group from Yemen — attacked Saudi oil tankers in the Red Sea, adding a second major shipping chokepoint to the already volatile standoff over Iran's closure of the Strait of Hormuz.

As the US positions naval assets and prepares for potential additional strikes on Iran, the Houthi blockade of the Bab el-Mandeb Strait threatens to choke off another vital artery for global oil flows, sending shockwaves through energy markets and putting Kenya's fuel import costs on a perilous upward trajectory, analysts warned.

The latest escalation has pushed Murban crude — the specific type of oil that Kenya uses as its main price benchmark for fuel imports — up more than 22 per cent in just days. For Kenyan motorists and households already struggling with high living costs, this means the brief respite in fuel prices seen last month could be short-lived, just as the government’s subsidy fund runs dangerously low.

The Houthis are a political and armed movement from Yemen, the poorest country in the Arabian Peninsula. They emerged in the 1990s as a revivalist movement for a branch of Shia Islam, and have been fighting Yemen’s internationally recognised government since 2014, when they seized the capital Sanaa. They are backed by Iran, Saudi Arabia’s main regional rival, and have been engaged in a brutal civil war with a Saudi-led coalition since 2015.

For Kenya, the Houthis matter because they control large parts of Yemen’s Red Sea coastline, including the strategic Bab el-Mandeb Strait — a narrow 29-kilometre waterway that connects the Red Sea to the Gulf of Aden and the Indian Ocean.

This strait is one of the world’s busiest shipping lanes, carrying roughly 12 per cent of global trade, one-quarter of container traffic and about 7 per cent of global oil supplies.

When the Houthis attack oil tankers or threaten to blockade the strait, as they did on Thursday with strikes on two Saudi tankers, they effectively threaten the flow of oil and other goods to Europe, Asia and East Africa — including Kenya.

 Any disruption forces ships to take much longer routes around the southern tip of Africa, driving up freight costs, insurance premiums and ultimately the price of fuel at Kenyan pumps.

Murban is a type of high-quality crude oil produced in Abu Dhabi, in the United Arab Emirates. It is considered a "light, sour" crude, which means it yields a high percentage of petrol and diesel when refined, making it popular with refiners worldwide.

For Kenya, Murban is the preferred benchmark for pricing our fuel imports. That’s because Kenya’s Government-to-Government (G-to-G) oil deal with Saudi Arabia and the UAE — introduced by President Ruto to stabilise fuel costs — sources most of its cargoes from the Gulf region, and Murban is the flagship grade from that area.

 This means the price of Murban crude directly determines how much Kenya pays for its imported petrol, diesel and kerosene.

When Murban crude jumped from $90 (Sh11,700) to $112 (Sh14,500) a barrel, that spike feeds into Kenya’s import costs within weeks. Energy experts estimate that every $1 (Sh130) increase in Murban crude adds roughly Sh2.6 to a litre of fuel in Nairobi — meaning the recent $22 (Sh2800) jump could theoretically add over Sh57 per litre if fully passed on to consumers. That is a huge burden for an already strained economy.

The Houthi attacks come on top of Iran’s near-closure of the Strait of Hormuz — another vital chokepoint through which about 20 per cent of global oil passes. Iran has threatened to block that strait in response to US military strikes, and President Donald Trump has ended a temporary ceasefire with renewed strikes on Iran.

With both straits now under threat, oil markets are pricing in severe supply disruptions, pushing benchmarks like Murban to their highest levels since April.

President Ruto’s government issued a strong condemnation on Friday, warning that the escalating maritime security crisis could disrupt global fuel supplies, increase freight costs and fuel inflation.

“The Government of the Republic of Kenya notes with concern the attacks by Houthis on commercial vessels, including Saudi Arabia oil tankers, along the Red Sea, and the threats to blockade the Bab al-Mandab Strait,” the Ministry of Foreign and Diaspora Affairs said in a statement.

Prime Cabinet Secretary Musalia Mudavadi warned that “against the backdrop of the ongoing Middle East crisis, including the closure of the Strait of Hormuz, these new attacks... could worsen the already dire situation by disrupting supply chains, particularly for oil and fertiliser, constraining international trade, and driving up maritime insurance and freight costs.”

Despite the growing uncertainty, the government has assured Kenyans that strategic measures are in place. Kenya will continue leveraging its G-to-G fuel import framework with major international oil producers, particularly Saudi Arabia and the UAE, to secure stable petroleum supplies and cushion consumers against sharp increases in global fuel prices.

Energy Cabinet Secretary Opiyo Wandayi has maintained that Kenya’s fuel supply is stable through the end of July 2026 under the G-to-G arrangement. “Every scheduled cargo has arrived and offloaded on time, and fuel has remained available at filling stations across the country,” he said previously before the latest flare-up.

In the current pricing cycle running from July 15 to August 14, Epra retained pump prices at Sh214.03 for petrol, Sh222.86 for diesel, and Sh191.38 for kerosene in Nairobi.

That was achieved by extending a reduced eight per cent VAT on petroleum products and deploying a Sh945 million subsidy from the Petroleum Development Levy.

However, the Ruto government’s ability to keep shielding consumers is shrinking fast. Wandayi reported that total subsidy spending since April has exceeded Sh20 billion, leaving the levy fund nearly exhausted.

Arrears already stand at an estimated Sh17 billion, and the government recently paid Sh7.9 billion for the May-June cycle while still owing about Sh10 billion for June-July.

Analysts warn that if Murban crude stays above $110 (Sh14,300) per barrel, the next Epra review in mid-August will force a difficult choice for the government. This means either the government absorbs the full cost and digs deeper into an already empty subsidy fund, or it passes the increase on to motorists — a politically toxic move with elections just over a year away.

For Kenya, every dollar increase in crude prices translates directly into higher transport and food costs. While annual inflation eased to 6.4 per cent in June, transport costs had already surged 16.1 per cent year-on-year, and food prices rose 8.6 per cent according to KNBS data.

The International Monetary Fund (IMF) has repeatedly warned that prolonged energy disruptions could worsen food insecurity and heighten the risk of social unrest in countries like Kenya with limited fiscal space.

 The World Bank has cut Kenya’s 2026 growth forecast to 4.3 per cent down from 4.9 per cent, citing higher global energy prices.

For President Ruto, the stakes could not be higher. With the next general election scheduled for August 10, 2027, just over 13 months away, the cost of living remains a key voter concern and the government is under pressure to rein in the runaway cost of living.