What to expect as US, Iran move to finalise peace deal

US President Donald Trump described the agreement as a major diplomatic breakthrough during a press conference at the G7 summit in France.

The parties are expected to spend the next 60 days negotiating a longer-term nuclear agreement.

The conflict, which began after the US and Israel launched strikes on Iran on February 28, triggered retaliatory attacks that destabilised the Gulf region and sent shockwaves across global energy markets.

The consequences have been felt far beyond the Middle East, disrupting international shipping, airline schedules and supply chains.

Tanzania has not been spared.

During the three months of conflict, fuel prices in the country rose sharply, placing pressure on transport, food prices and household spending.

In Dar es Salaam, petrol prices climbed to Sh4,086 per litre from Sh2,864 in March. Diesel increased to Sh4,333 per litre from Sh2,858 in March, while kerosene rose to Sh4,685 from Sh2,932 in March.

The rise in fuel costs has triggered wider economic effects, increasing transport charges and pushing up the cost of moving goods from production areas to markets.

Regulators have already adjusted public transport fares to cushion operators from rising operational costs. The Land Transport Regulatory Authority (Latra) and the Zanzibar Maritime Authority approved fare increases across several categories.

Commuter fares for journeys of up to 10 kilometres increased from Sh600 to Sh700, while medium-distance routes now cost as much as Sh1,500 depending on distance.

Long-distance bus fares have also risen, averaging Sh57.93 per kilometre on tarmac roads and Sh66.62 on gravel roads.

The changes have pushed the cost of a typical Dar es Salaam-Arusha journey beyond Sh36,000. Ride-hailing services have also raised prices by about 22 percent, while ferry charges between Dar es Salaam and Zanzibar now range between Sh40,000 and Sh80,000 depending on travel class.

For many households, transport has become one of the fastest-growing expenses, particularly in urban areas where commuting is unavoidable.

The pressure on transport costs has also fed into broader inflationary trends. Tanzania's annual headline inflation currently stands at around four percent, driven largely by a 9.2 percent rise in transport costs and a 5.7 percent increase in food prices, according to recent official figures.

Food prices have been particularly affected because fuel costs influence nearly every stage of the supply chain, including production, harvesting, processing, transportation and retail distribution.

Against this backdrop, analysts say the emerging US-Iran agreement could help reverse some of the economic strain experienced during the conflict, although they caution that the benefits may not be immediate.

Indeed, oil prices, which had reached over $100 per barrel during the period of tense hostilities, fell two percent yesterday, to their lowest since the first trading ‌day of the Iran war.

Brent crude futures were down $1.59, or 2 percent, at $77.96 a barrel as of 0811 GMT, while U.S. West Texas Intermediate fell $1.83, or 2.38 percent, to $74.96 a barrel.

Speaking to The Citizen,  Tanzania Association of Oil Marketing Companies (Taomac) executive director Raphael Mgaya said any reduction in international crude prices would take time to be reflected in local markets.

He explained that fuel import arrangements for the coming months had already been concluded, limiting the possibility of an immediate adjustment.

"Even if global prices come down, the effect will not be immediate in Tanzania. We expect possible adjustments from September onwards," he said.

Mr Mgaya said prices were unlikely to return to pre-war levels in the short term because global supply chains would still require time to recover fully.

He added that lower fuel prices would have wider economic benefits, including reduced transport costs, lower commodity prices and improved household purchasing power.

Importers, he said, would also benefit from lower operating expenses and reduced financing costs. Tanzania Petroleum Development Corporation (TPDC) managing director Mussa Makame offered a more optimistic outlook, saying early signs of easing global prices had already emerged following diplomatic progress.

He said Tanzania could begin experiencing some relief from August.

According to Mr Makame, TPDC had been tasked with securing fuel supplies during the period of market uncertainty and had succeeded in maintaining availability in the country despite regional disruptions.

"Since discussions began emerging, prices in the international market have started falling. This means we are heading towards relief in Tanzania as well, possibly starting from August," he said.

Mr Makame noted that the conflict had increased insurance, freight and shipping costs, while vessel availability had also become constrained.

"If these negotiations succeed, we will begin seeing prices coming down. There were also additional costs associated with insurance and shipping. If these issues are addressed, the market will gradually improve," he said.

Energy and Water Utilities Regulatory Authority (Ewura) director general Gerald Maganga said fuel prices could stabilise and eventually decline if the agreement successfully restores trade routes and reduces geopolitical uncertainty.

He said the reopening of the Strait of Hormuz would play a significant role in easing supply pressures in global oil markets.

Mr Maganga, however, warned that recovery would not happen overnight because the conflict had disrupted infrastructure and refining systems.

"Once the situation normalises and affected infrastructure is restored, the market will gradually return to normal conditions and prices may begin easing," he said.

Meanwhile, Central Corridor Board chairman Canoth Manishimwe said the diplomatic breakthrough could also help restore trade movements affected by the conflict.

"As you have seen, there were disruptions and cargo movement was affected. Now that an agreement has been reached, we expect trade and business activities to resume," he said.

He said lower fuel costs would reduce business operating expenses and improve trade across member states.