Kenya’s equity market has come under renewed pressure following heightened geopolitical tensions in the Middle East, with the five largest firms on the Nairobi Securities Exchange collectively losing Sh200 billion in market valuation. The decline has been largely driven by sustained net selling by foreign investors, who have offloaded Sh4.2 billion worth of shares since March 2, 2026, amid rising concerns over global inflation and a potential economic slowdown.
The sell-off has disproportionately affected blue-chip stocks, including Safaricom, Equity Group, KCB Group, East African Breweries Limited and Co-operative Bank of Kenya. These firms account for approximately 60 percent of total investor wealth at the bourse, making their performance critical to overall market stability. Their strong fundamentals and liquidity have historically attracted foreign capital, but this exposure has also made them more vulnerable during periods of global uncertainty.
The market reaction follows the escalation of conflict beginning February 28, when the United States and Israel launched strikes against Iran, triggering retaliatory actions and disruptions across the Gulf region. The closure of the Strait of Hormuz, which handles about 25 percent of global oil and liquefied natural gas shipments, has intensified fears of supply shocks. These developments have raised expectations of higher fuel and food prices globally, prompting investors to shift toward cash and dollar-denominated assets.
Among the affected firms, Safaricom recorded the steepest decline, with its valuation falling by 10.8 percent or Sh138.22 billion to Sh1.14 trillion, as its share price dropped from Sh32 to Sh28.55. KCB Group followed with a 12.1 percent decline, shedding Sh31.33 billion to reach Sh226.55 billion. Equity Group’s market capitalisation fell by 8.1 percent or Sh23.59 billion to Sh267.93 billion. East African Breweries Limited and Co-operative Bank posted smaller losses of Sh2.37 billion and Sh2.64 billion, bringing their valuations to Sh202.83 billion and Sh168.68 billion, respectively.
Overall, the NSE has recorded a net decline of Sh88.5 billion in market capitalisation over the period. However, this figure has been partially offset by the listing of Kenya Pipeline Company on March 10, which added Sh166.83 billion to the market. Excluding this new listing and its current valuation of Sh164.29 billion, the broader market would have experienced a deeper contraction of Sh252.74 billion. The total market capitalisation stood at Sh3.322 trillion, down from Sh3.41 trillion recorded on March 27.
The downturn has occurred despite a generally positive corporate earnings season, particularly within the banking sector. Eight of the nine tier-one banks have released full-year results in recent weeks, with most reporting increased dividend payouts compared to 2024. Dividend book closure dates fall between April 2 and May 22, 2026, a period that would typically attract buying interest. However, foreign investor exits have outweighed these incentives, with only Stanbic Bank recording a marginal gain of 1.4 percent or Sh1.38 billion during the period.
Beyond equities, investors are closely monitoring the potential macroeconomic impact of rising oil prices. Sustained increases could drive inflation through higher energy and transport costs, affecting the broader economy. This scenario may influence monetary policy, particularly after the Central Bank of Kenya implemented 10 consecutive rate cuts since August 2024, reducing the benchmark rate from 13 percent to 8.75 percent.
A reversal in this accommodative stance could shift investor preference toward fixed-income securities such as Treasury bills and bonds, further pressuring equity markets. The current developments highlight the sensitivity of Kenya’s capital markets to global shocks, particularly through foreign investor participation and commodity price dynamics.
