By Toma Imirhe
The ongoing war in the Middle East involving the United States and Israel on one side and Iran on the other has emerged as a major complicating factor for the this week’s interest rate decision by the Bank of Ghana’s Monetary Policy Committee (MPC), due to be announced on Wednesday March 18, as surging global oil prices threaten to reverse Ghana’s recent gains in taming inflation.
The MPC is deliberating on the benchmark Monetary Policy Rate (MPR) between Monday and Wednesday this week, at a time when Ghana’s inflation has fallen to historic lows. However, the sudden escalation of geopolitical tensions in the oil-producing Middle East is injecting new uncertainty into the inflation outlook.
Recent data from the Ghana Statistical Service shows that consumer inflation dropped to around 3.3% in February 2026, the lowest level in nearly three decades.
The sharp disinflation over the past year had strengthened expectations that the central bank could continue easing monetary policy to support economic recovery. Earlier this year the MPC cut the policy rate by 250 basis points to 15.5%, citing improved macroeconomic conditions and anchored inflation expectations.
However, the rapidly escalating Middle East conflict now threatens to upend that trajectory
Energy markets have been jolted by the war, particularly following disruptions to shipping through the strategic Strait of Hormuz — a maritime corridor through which roughly 20% of the world’s oil supply normally passes.
Attacks on vessels and warnings by Iranian forces have sharply reduced tanker traffic through the passage, triggering what the International Energy Agency describes as one of the largest disruptions to global oil supply in history.
As a result, crude oil prices have surged above US$100 per barrel, raising fears of a new inflationary wave across both advanced and emerging economies.
Economists warn that such energy shocks tend to ripple through the entire global economy because fuel costs influence transport, manufacturing and food prices.
“Rising oil prices weigh on economic growth and push up inflation,” economists have warned as markets react to the conflict.
For Ghana, the impact is likely to be transmitted through higher fuel import costs and rising pump prices, which in turn affect transport fares and production costs across the economy.
Analysts say this dynamic is precisely what may complicate the MPC’s upcoming decision.
According to market observers in Accra, rising crude prices from the Middle East conflict could halt or slow planned rate cuts, as higher fuel costs threaten to rekindle inflation and increase the country’s import bill. The latest petroleum products pricing window, effective from this week, indicates an up to 17% increase in petrol and diesel at the pumps,
Ghana remains a net importer of refined petroleum products despite producing crude oil, meaning international price swings are quickly reflected in domestic fuel prices.
If the oil shock persists, the country could see renewed pressure on the cedi as the cost of energy imports rises, further amplifying inflationary risks.
This leaves the Bank of Ghana facing a classic monetary policy dilemma.
On one hand, the dramatic decline in inflation over the past year would ordinarily justify further easing to stimulate credit and economic activity.
On the other hand, the central bank’s core mandate is price stability, which could be jeopardised if global energy prices remain elevated.
The MPC is now weighing these two conflicting realities
The MPC itself has previously warned that external shocks remain a key risk to the inflation outlook. In its latest monetary policy report, the committee noted that global uncertainties and possible price adjustments in key sectors could pose “upside risks” to inflation despite the current disinflation trend.
The war in the Middle East appears to have become precisely such a risk.
Analysts note that sustained increases in oil prices historically translate into broader price pressures across economies. Even a 10% rise in oil prices could raise global inflation by around 0.4%, according to economists cited in recent analyses of the crisis.
The longer the conflict continues — especially if disruptions to shipping routes persist — the greater the risk of a prolonged energy shock.
Energy analysts say the closure of the Strait of Hormuz alone has already cut global oil supply and could push prices significantly higher if the conflict intensifies
For the Bank of Ghana, the key question will be whether the oil-driven inflation risk is temporary or persistent.
If policymakers judge the energy shock to be short-lived, they may still proceed with gradual policy easing.
But if oil prices remain elevated for several months, the MPC may be forced to pause or even tighten policy to prevent inflation expectations from rising again.
Either way, analysts say the Middle East war has injected a fresh layer of uncertainty into Ghana’s monetary policy outlook — just as the country appeared to be emerging from one of the most difficult inflation cycles in decades.
The MPC’s next announcement, due on Wednesday, March 18, is therefore expected to be closely watched by investors, businesses and financial markets, both for the interest rate decision itself and for signals about how Ghana intends to navigate the new global oil shock.
Watch out for analysis of the MPC’s rate decision on this news portal on Thursday, March 19
