Oil price relief offers temporary reprieve

Staff Writer

Recent declines in oil prices provide some near-term relief, with crude prices falling from above US$110 per barrel to around US$94 following a reduction in the geopolitical risk premium after political developments in the United States, according to Standard Bank Namibia’s group economist, Helena Mboti.

The decline reflects easing market concerns about the likelihood of further escalation in tensions between the United States and Iran.

However, underlying geopolitical risks remain elevated in the Middle East and other regions, leaving oil markets vulnerable to renewed price increases.

The outlook for inflation will therefore depend largely on whether market perceptions of geopolitical risk continue to ease rather than whether tensions have been completely resolved.

Any renewed escalation could quickly push oil prices above US$110 per barrel, reintroducing a substantial geopolitical risk premium into global oil markets, according to Mboti.

Such an increase would place renewed upward pressure on global, regional and domestic inflation, particularly through higher fuel and energy costs, she said.

The recent decline in oil prices offers some relief to economies facing elevated energy costs, but the sustainability of that relief remains uncertain while geopolitical tensions persist.

For Namibia, which is exposed to international oil price movements through its fuel import requirements, a renewed increase in crude prices could reverse the recent easing and add to domestic inflationary pressures.

Annual inflation accelerated to 5.6% in October 2026, from 5.4% in September, driven by rising transport and food costs, with the effects of higher fuel prices and foot-and-mouth disease (FMD) increasingly filtering through to consumers.

The October inflation rate was significantly higher than the 3.6% recorded in October 2025, according to the latest inflation assessment.

Transport remained the largest contributor to headline inflation, accounting for 2.5 percentage points of the overall 5.6% rate, compared with 0.3 percentage points a year earlier.

The full effects of El Niño and FMD on food prices are, however, yet to materialise, leaving further upside risks for 2027, according to Mboti.

The increases reflect persistent dry weather conditions that are placing pressure on water availability and hydroelectric power generation. Housing contributed 1.0 percentage point to headline inflation, broadly unchanged from the previous month.

Mboti said weather-related supply risks, FMD-related disruptions and uncertainty surrounding international oil prices could complicate the expected moderation.

A stabilisation in global oil prices and an improvement in food supply conditions could help headline inflation moderate, although the timing and extent of the easing will depend on how these risks develop.