African Currencies Fall 3.2% After Middle East Tensions, Says UNCTAD

African currencies weakened after recent geopolitical tensions involving the United States, Israel and Iran spurred a global flight from riskier assets, the United Nations Conference on Trade and Development (UNCTAD) said in a new report.

In “Trade and Development Foresights 2026: Global economy faces a geopolitical challenge,” UNCTAD said the outbreak of conflict-related shocks between February 27 and March 13 disrupted capital flows, dented investor sentiment and increased volatility across developing markets.

The report found African currencies fell 3.2 per cent in the immediate aftermath of the escalation, reversing earlier gains of 8.7 per cent recorded during the pre-conflict period. Emerging-market currencies, which had risen 5.9 per cent before the crisis, slipped 1.3 per cent afterwards, while frontier markets moved from a 3.3 per cent appreciation to a 0.7 per cent depreciation.

Across regions, the Americas suffered the largest post-conflict decline among developing areas, down 3.6 per cent after a prior 16.6 per cent gain. Asia proved relatively resilient, recovering from a 0.8 per cent decline to post a 2.0 per cent appreciation.

UNCTAD linked the different outcomes to exchange-rate regimes, debt sustainability worries, the scale of prior capital inflows and the share of non-resident investors in domestic markets. The agency warned that African economies are particularly exposed to external shocks because many rely heavily on imports, foreign portfolio inflows and external borrowing.

The report also flagged secondary effects that could deepen domestic pressures: rising global energy prices are feeding inflation across several African countries, heightened geopolitical uncertainty is curbing investor appetite for frontier assets, and tighter global financial conditions are raising concerns about debt sustainability and potential capital flight.

UNCTAD’s findings underline how short-term geopolitical shocks can rapidly reverse earlier currency gains and strain emerging and frontier economies that remain dependent on external financing.