The conflict in the Middle East will benefit the markets in African petroleum economies. However, it will adversely impact energy importers, of which there are numerous in Africa. James Norris, Analyst at Corporate Africa, explains.

The first quarter of 2026 solidified Africa’s reputation as a land of high risk and extraordinary reward, but a single story did not define the continent’s performance. Instead, investors witnessed a stark divergence driven by local policy reforms, commodity cycles, and varying exposures to global geopolitical shocks, which resulted in some markets thriving while others struggled to keep pace, highlighting the complexities of investment opportunities across the continent, particularly as some countries implemented successful economic strategies while others faced political instability. While the MSCI Emerging Markets Index, which measures the performance of stocks in emerging markets, returned a respectable 13.9 per cent by late February, specific African exchanges more than doubled that figure, creating distinct pockets of “winners” and “losers.”

The ten major African markets achieved differing results with significant contrast between Nigeria and South Africa. However, smaller markets like Ghana and Tunisia experienced a resurgence, while frontier markets faced vulnerabilities due to global headwinds, particularly in sectors such as agriculture and tourism that are sensitive to international economic fluctuations.

Nigeria and South Africa

The most illuminating comparison of the period is between Africa’s largest economy (Nigeria) and its most developed market (South Africa). In 2026, their performances have diverged significantly.

Nigeria (NGX): The Liquidity-Driven Juggernaut

The Nigerian Exchange has been the undisputed star of the continent. As of late March 2026, the All-Share Index delivered a staggering 29.11 per cent year-to-date (YTD) return, with market capitalization surging by nearly N30 trillion in the first quarter alone (US$21.5 billion). However, analysts caution that this rally is not purely a function of economic health but rather a “liquidity-driven” phenomenon.

According to Johnson Chukwu, managing director of Cowry Asset Management, declining real yields in fixed-income instruments have forced institutional investors—particularly pension funds—to rotate aggressively into equities to hedge against inflation, which remained elevated at 15.38 per cent in March 2026. This technical demand has fueled a historic run for the “SWOOT” (Stocks Worth Over One Trillion) category. These 24 elite companies recorded capital gains of N27.448 trillion (US$20.4), representing a 33.8 per cent increase in their combined valuation.

The Winners

The oil & gas sector led the charge with a massive 64.22 per cent gain, directly benefiting from rising crude prices amid Middle East tensions. MTN Nigeria was the absolute standout, adding N5.23 trillion to its market cap—a 48.73 per cent surge. The industrial goods sector, led by cement manufacturers, was the highest contributor to the SWOOT growth, adding N9.786 trillion (US$7.3 billion).

The Losers

Interestingly, while the index boomed, consumer-facing stocks struggled. Nigerian Breweries recorded a 3.05 per cent decline in market cap, reflecting weak household purchasing power. The banking sector also saw mild selling pressure in late March as investors took profits off the table.

South Africa (JSE) Resource-Dependent Laggard

In stark contrast to Nigeria’s exuberance, the FTSE/JSE Top 40 was effectively flat, sitting at -1.07 per cent YTD as of early April. The South African market is suffering from a severe lack of breadth.

Unum Capital’s detailed sector rotation analysis indicates that the JSE is currently heavily reliant on resources. Platinum miners continue to occupy the “Leading Quadrant” (bullish momentum), but the rest of the market remains fractured.

The “SA Inc.” Collapse: A significant portion of South African domestic stocks—including technology, consumer discretionary, retailers, and hospitals—are languishing in the “Lagging Quadrant” (low relative strength, low momentum). While gold miners had a structural bull run, they entered a “weakening” phase (profit-taking) in early 2026. Meanwhile, general miners are showing early signs of a turnaround, moving into the “Improving Quadrant.”

The flat performance of the JSE highlights a critical divergence: without a recovery in domestic consumer confidence and logistics (power/ports), South Africa cannot catch up to the monetary-driven rally seen in West Africa.

Ghana and Tunisia

While Nigeria grabbed headlines, two smaller markets delivered technically superior per centage returns. Investors have experienced a tumultuous journey with the Ghana Stock Exchange Composite Index. After collapsing during the 2022-2024 debt crisis, the index rebounded with ferocity. In March 2026, the GSE hit an all-time high of 16,107 points. However, this extreme volatility was on display as the index corrected sharply, dropping over 10 per cent in the first week of April alone, yet remaining a staggering 113.9 per cent higher than a year ago. The driver here is the Financials sector, which surged 71.86 per cent as investors priced in the stabilization of the Cedi and successful IMF reviews. Banks like Republic Bank (+97 per cent) led the recovery.

Tunisia (TUNINDEX):

Perhaps the most underrated performer is the Tunisian market. Without the oil wealth of Nigeria or the mineral wealth of SA, the TUNINDEX delivered a steady +15.8 per cent YTD return, bringing its 12-month gain to 35.8 per cent. Earnings-driven growth, supported by a 9.9 per cent annual increase in corporate earnings over three years, fuels this growth. The consumer staples sector has been particularly resilient, providing a safe haven for local capital, especially during periods of economic uncertainty and geopolitical tensions in the region, as it continues to meet the essential needs of the population despite external challenges, such as rising inflation and supply chain disruptions that have affected other sectors.

Egypt vs. Morocco (The Geopolitical Divide)

North Africa presented a classic case of “haves” and “have-nots” regarding the Middle East conflict.

Egypt (EGX30) climbed 20.5 per cent in the first two months of the year. However, the index was a large-cap story. The EGX70 (small cap index) actually declined, suggesting that retail investors missed the rally. Telecom Egypt and Rameda Pharmaceuticals were top gainers, benefiting from dollar-denominated revenues and local demand, respectively.

Morocco (MASI): The Casablanca MASI index was the region’s loser, down -1.4 per cent YTD as of late February. The threat of the Hormuz Strait closure and spillover from the Sudan conflict caused foreign investors to derisk, pulling capital out of the North African kingdom.

The Markets of Kenya, Mauritius, BRVM, and Zimbabwe

The Nairobi Stock Exchange in Kenya was flat (+0.45 per cent). However, a unique commodity story emerged: Coffee producer Eaagads was the best-performing stock, jumping 58.4 per cent due to a surge in global coffee prices, followed by Kenya Airways (+57.5 per cent).

Mauritius (SEMDEX): The market declined slightly (-1.2 per cent), pressured by global financial outflows as Western institutions pulled liquidity back to the US.

BRVM (West Africa): The regional exchange fell -2.3 per cent. It peaked early in the year but suffered from profit-taking as investors rotated funds specifically into the hotter Nigerian market, which has been attracting significant investment due to its strong economic growth and favorable market conditions.

Zimbabwe: The market remains volatile, but the introduction of the ZiG (new gold-backed currency) has stabilized equities in USD terms, though local currency valuations remain distorted.

Outlook for the Rest of 2026

The outlook for the remainder of 2026 hinges entirely on the “Global Conflict Variable.”

The Nigerian NGX rally is dangerously reliant on liquidity. If the Central Bank of Nigeria raises interest rates further to combat the 15.38 per cent inflation, the fixed-income yields could lure money out of equities, triggering a sharp correction. Furthermore, the budget deficit of N68.32 trillion (US$50.7 billion) poses a fiscal risk.

As noted by analysts, a significant geopolitical risk is in play: “War shocks transmit through oil to inflation, then to interest rates, and ultimately to equities.” Any escalation in the Middle East (Hormuz) or expansion of the Sudan conflict will spike oil prices. While beneficial for Nigerian oil stocks, such an event would crush the currencies of net-importers like Kenya and exacerbate volatility in 

Morocco and Egypt. 

Currency devaluation often dampens returns for US-dollar investors. While the local returns in Egypt (EGX30) look fantastic, the currency devaluation means USD returns are meager. Nigeria faces a similar “negative currency attribution” risk.

The winners of Q1 2026 were the reformers (Nigeria, Ghana) and the defensive value plays (Tunisia). The losers were the markets caught in the geopolitical crossfire (Morocco) and those suffering from structural stagnation (South Africa).

For the rest of 2026, Nigeria will likely remain the leader in nominal terms, though the rally is becoming overstretched. Morocco offers a high-risk recovery play if the Middle East stabilizes, as its economy could benefit from increased foreign investment and tourism in the aftermath of geopolitical tensions. Investors should watch the US Fed’s interest rate decisions closely; a rate cut in Q3 could supercharge African currency stability, but a hike could pop the liquidity bubble currently inflating the NGX.