The Kenyan shilling is facing renewed pressure as global oil prices climb, with international analysts warning the currency could weaken sharply in the months ahead.

Economists at Citigroup and Société Générale say the shilling could fall to around Ksh135 against the U.S. dollar if oil prices rise above $100 a barrel and remain there. That level has not been seen in roughly two years.

The concern reflects Kenya’s heavy reliance on imported fuel. As oil prices increase, the country spends more foreign currency on imports, putting pressure on its reserves and widening its trade gap.

David Cowan, Chief Africa Economist at Citigroup, described the risk as immediate. “If oil moves back above $100 and stays there, the currency could slide to 135 shillings this year,” he said in an interview with Bloomberg.

The shilling is currently trading at about Ksh129 to the dollar, according to data from the Central Bank of Kenya. It has remained relatively stable in recent weeks, briefly holding below the Ksh130 mark.

Some analysts believe the central bank may allow a gradual weakening rather than spend heavily to defend a specific rate. A major UK lender has forecast the currency could ease to around Ksh132 by the end of the year under sustained pressure.

But officials in Nairobi are pushing back against the more pessimistic outlook.

Governor Kamau Thugge of the Central Bank says the country is better prepared than in past shocks. He pointed to a balance of payments surplus of about $619 million and what he described as strong foreign exchange reserves.

“We have taken into account much lower export growth, slower remittances and reduced tourism earnings,” he said. “Even under those assumptions, the position remains solid.”

Thugge added that the bank had built reserves precisely to cushion the economy against global shocks. “We were waiting for this kind of shock,” he said, insisting that exchange rate volatility would remain manageable.

The global backdrop, however, remains uncertain. Rising tensions in the Middle East have pushed up oil prices and disrupted supply routes. For Kenya, the impact goes beyond fuel imports. The region is also a key source of remittances, accounting for a notable share of inflows.

At the same time, export sectors such as tea and flowers have faced logistical challenges linked to the same disruptions, further straining foreign exchange earnings.

Analysts now expect Kenya’s current account deficit to widen to about 3 per cent of GDP this year, up from earlier projections of 2.2 per cent, largely due to higher energy costs.

Still, not all forecasts are bleak. Gergely Urmossy, a frontier markets strategist at Société Générale, said currency adjustments may become a central issue later in the year, but did not rule out a more measured outcome.

For households and businesses, the stakes are clear. A weaker shilling would raise the cost of imports, from fuel to food, potentially feeding into higher prices across the economy.

For now, the currency sits at a delicate balance — pulled between global forces and domestic confidence.