NAIROBI, Kenya – A peace agreement brokered by Pakistan between the United States and Iran has sparked fresh hopes of lower fuel prices in Kenya, with global oil markets already responding positively ahead of the formal signing of the deal scheduled for June 19 in Switzerland. The breakthrough has fueled expectations that international crude oil prices could gradually return to pre-war levels, potentially easing pressure on Kenyan consumers who have endured months of rising fuel costs and inflation.
Brent crude, the global benchmark for oil prices, fell by 4.8 percent to $83.18 per barrel shortly after Pakistan announced that an agreement had been reached and US President Donald Trump declared the reopening of the strategic Strait of Hormuz shipping route.
“Let the oil flow!” Trump posted on his Truth Social platform, signaling what could mark the end of months of disruptions that began when the United States and Israel launched attacks on Iran on February 28.
The conflict triggered several ceasefires that quickly collapsed amid accusations of violations by both sides, keeping energy markets on edge and driving fuel prices higher worldwide.
In Kenya, the impact was immediate and severe. Diesel prices rose by an unprecedented Sh46.29 per litre during the May–June pricing cycle, pushing the pump price to a record Sh242.92 per litre.
Super petrol increased by Sh16.65 to Sh214.25 per litre, while kerosene remained unchanged at Sh152.78 per litre.
The sharp increase sparked nationwide protests and a transport operators’ strike, disrupting travel and business activities across the country. In response, the government deployed subsidies through the Petroleum Development Levy and reduced Value Added Tax (VAT) on petroleum products from 16 percent to 8 percent.
To further cushion consumers, the Energy and Petroleum Regulatory Authority (EPRA) later reduced diesel prices by Sh10 per litre while increasing kerosene prices to discourage fuel adulteration.
A further Sh10 reduction in diesel prices was implemented during the June–July fuel review following a presidential directive. As a result, Super Petrol, Diesel, and Kerosene are currently retailing in Nairobi at Sh214.03, Sh222.86, and Sh191.38 per litre respectively, with the prices remaining in effect until July 14.
Market analysts say the peace agreement could pave the way for further declines in oil prices if it holds, although consumers may not experience immediate benefits. Experts caution that oil flows through the Strait of Hormuz may take time to normalize. Iran is believed to have laid mines in the waterway, and clearing them could take several months.
Additionally, hundreds of oil tankers remain queued for passage, while production and export operations across the region will require time to return to full capacity. Nevertheless, a lasting peace agreement would remove a major source of uncertainty that has driven oil prices upward since the outbreak of the conflict.
The Strait of Hormuz handles approximately 20 percent of global oil and liquefied natural gas shipments. Its closure sent Brent crude prices soaring from around $70 per barrel before the conflict to peaks of nearly $120 per barrel during the crisis. The resulting supply shock more than doubled the landed cost of some imported petroleum products in Kenya and contributed to the steepest monthly diesel price increase recorded in more than two decades.
During the April–May pricing cycle, diesel prices rose by Sh40.30 to Sh206.84 per litre in Nairobi, while petrol increased by Sh28.69 to Sh206.97 per litre. The National Treasury subsequently reduced VAT on fuel products, lowering the cost of petrol and diesel and providing temporary relief to consumers. Should the ceasefire hold and oil markets continue to stabilize, analysts expect global crude prices to decline further. Combined with the government’s decision to retain the reduced VAT rate, this could create room for lower pump prices in the coming months.
Cheaper fuel would also help ease inflationary pressures across the economy. In its latest fuel price review, EPRA reported that the average landed cost of imported Super Petrol decreased by 0.56 percent, from US$906.23 per cubic metre in April 2026 to US$901.16 per cubic metre in May 2026.
The landed cost of diesel increased slightly by 0.21 percent, from US$1,291.98 per cubic metre to US$1,294.71 per cubic metre, while kerosene decreased by 0.33 percent, from US$1,332.73 per cubic metre to US$1,328.36 per cubic metre during the same period.
The Central Bank of Kenya’s Monetary Policy Committee (MPC) has warned that higher fuel costs and global supply chain disruptions have increased transportation and production expenses, contributing to rising consumer prices.
With headline inflation currently standing at 6.7 percent, any sustained decline in fuel costs would provide much-needed relief for households and businesses struggling with the high cost of living.
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