Gulf Tensions Test Kenya’s Trade Resilience as Diversification Offers a Buffer
On Monday’s edition of the Global Digest podcast show, Capital FM Diplomacy and Security journalist Bruhan Makong and I explored the shifting value—and visible limits—of global alliances amid escalating tensions in the Middle East. Nowhere is this more evident than in the cautious posture of Gulf Cooperation Council (GCC) states. Despite being frequent targets of Iranian retaliation, they have declined to join U.S.-led military operations or support deployments in the Strait of Hormuz, signaling a clear preference for de-escalation over direct confrontation. Yet beneath this restraint lies a more complex reality: speculation persists that key players such as Saudi Arabia and the UAE may quietly support sustained U.S. pressure to strategically weaken Iran.
For Kenya, this geopolitical balancing act is no abstraction. It is unfolding in real time across its testing both the resilience of its trade networks and the depth of its international partnerships.
Over the past year, Nairobi has significantly deepened its engagement with the UAE, formalizing ties through a Comprehensive Economic Partnership Agreement (CEPA). More than a trade deal, the partnership has been framed as a gateway to technological transformation, underscored by the UAE’s US$1 billion “AI for Development” initiative launched in 2025. The ambition is clear: position Kenya not just as an export hub, but as a regional node in the global digital economy.
“The initiative mobilises the full UAE AI value chain, with private-sector firms delivering integrated solutions across cloud and compute infrastructure, data platforms, and deployment-ready AI applications,” explains H.E. Sultan Mohammed Al Shamsi, the UAE’s Assistant Minister of Foreign Affairs for Development and International Organizations. “These solutions are designed for rapid implementation across priority sectors such as government services, healthcare, education, agriculture, and climate resilience.”
Yet, even as both countries pursue ambitious long-term collaboration, immediate pressures are mounting. Disruptions to shipping routes, rising fuel costs, and strained logistics corridors are beginning to test whether these strengthened ties can withstand a crisis unfolding at the critical gateway between the Gulf and East Africa.
Nairobi has long viewed Gulf partnerships as a cornerstone of its economic expansion. However, the current conflict is exposing clear vulnerabilities—from rerouted fresh produce shipments to a steep decline in meat exports. As the crisis enters its fourth week, a central question emerges: can Kenya’s push to diversify beyond traditional exports deliver the resilience needed to absorb a shock that is proving neither distant nor marginal?
Government officials maintain that the situation remains manageable. In an interview with Citizen TV’s Power Talk, Cabinet Secretary for Trade and Industry Lee Kinyanjui noted that some fresh produce shipments are being rerouted through alternative corridors, including Egypt and Saudi Arabia, and that these adjustments have so far prevented a major disruption.
Private-sector leaders, however, offer a more cautious assessment. Erick Rutto, President of the Kenya National Chamber of Commerce and Industry—which represents roughly 4,000 members, including 1,500 regular exporters—reports a significant slowdown in export activity. He also highlights a lack of structured engagement between government and industry, despite the prolonged nature of the crisis.
Michael Michie, co-founder and CEO of EversTech, argues that the risks are being underestimated.
“The first mistake is to treat the Gulf conflict as geographically distant and economically marginal to Kenya. It is not,” he says. “As of March 2026, the shock is being transmitted through energy, shipping, aviation, trade routes, and digital infrastructure,” he said during an interview for the Global Digest.
Disruptions around the Strait of Hormuz have already constrained flows of oil, gas, and essential goods, with global oil prices rising sharply. For Kenya, the implications are significant.
“The Gulf War is more likely to be a cost shock than a collapse shock for Kenya. It raises input costs, slows trade, pressures inflation, and complicates ICT deployment. However, it also exposes a strategic lesson that Kenya should take seriously: digital ambition without infrastructure resilience is fragile. The right response is not panic,” Michie explained.
At the macro level, Kenya faces exposure through three main channels. The first is fuel and inflation, given its reliance on supply arrangements with Gulf energy firms such as Saudi Aramco, ADNOC, and the Emirates National Oil Company. Sustained price increases or supply disruptions will inevitably feed into domestic costs and external account pressures.
The second is trade and freight. Export flows to the Middle East—particularly during peak demand periods such as Ramadan—have been severely affected, with some shipments rendered uneconomical due to high freight costs and route disruptions.
The third is investor sentiment. Heightened geopolitical uncertainty tends to raise risk premiums, delay procurement decisions, and make firms more cautious about expansion, ultimately slowing investment across the region.
The impact is also being felt in Kenya’s ICT sector. While less immediately visible than in agriculture or aviation, it is arguably more systemic. The country’s digital economy depends heavily on imported hardware—from servers and network equipment to power systems and cooling infrastructure. As shipping lines reroute around the Cape of Good Hope due to Red Sea instability, lead times are increasing and costs are rising.
For telecom operators, cloud providers, fintech firms, and AI developers, this translates into higher capital expenditure, slower deployment cycles, and tighter working capital conditions.
Ultimately, the Gulf conflict is shaping up to be less of a collapse shock and more of a sustained cost shock for Kenya—raising input costs, slowing trade, and complicating infrastructure development. But it also delivers a clear strategic message: ambition without resilience is fragile.
“The appropriate response is to accelerate local and regional capacity in cloud, energy-secure data centers, redundant connectivity, cybersecurity, and supply-chain diversification. In that sense, the crisis reinforces rather than weakens the case for Kenya to build more sovereign and resilient digital infrastructure at home”, Michie concludes.
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The author is an Associate Editor at Capital Group and a co-host of the Global Digest podcast show which airs Mondays 1830-1930hrs. It aims to inform listeners about the latest news and current events from around the world, regionally and locally, by providing in-depth analysis and diverse perspectives.