Millions of Kenyans have seen their cost of living rise so sharply this year that up to 2.4 million people have been pushed into poverty, with the World Bank blaming the economic effects of the conflict in the Middle East for reversing recent gains in reducing poverty.
The World Bank says between one million and 2.4 million Kenyans fell below the poverty line during the first six months of 2026 as higher fuel prices spread across the economy, raising the cost of transport, food and other basic needs. The lender says households in urban areas are likely to have suffered the biggest impact.
In its July 2026 Kenya Economic Update, the bank says the conflict involving Iran, the United States and Israel has affected Kenya through rising global oil prices, trade disruptions and growing uncertainty, all of which have weighed on economic activity.
The report also raises concern over the country's political outlook, warning that the approach of next year's General Election could affect investment decisions and slow the pace of economic reforms.
"At the same time, pre-election spending pressures could weaken fiscal discipline and delay planned consolidation efforts, while heightened political tensions could adversely affect business and consumer confidence," the bank says in its latest economic update report for Kenya, published in July 2026.
The lender estimates that Kenya's poverty rate may have gone up by between two and 4.5 percentage points in the first half of this year. This translates to an additional one million to 2.4 million people falling below the poverty line.
Before the latest shock, Kenya's national poverty rate had been projected to fall from 39.8 percent in 2022 to 37.5 percent in 2025. The World Bank now says the rise in living costs could have pushed the poverty rate back to between 39.5 percent and 42 percent in 2026.
Nearly half of Kenyans survive on less than $3 a day, placing many households at risk whenever prices rise.
"Microsimulation estimates suggest that the poverty rate, measured at the $3 international poverty line, could be two to 4.5 percentage points higher in 2026, depending on the extent to which higher fuel prices are passed through to economy-wide prices," the bank says.
"This implies that an additional 1 million to 2.4 million Kenyans could fall below the poverty line, with urban households expected to be more affected."
According to the report, Kenya has felt the effects of the Middle East conflict through several economic channels, with higher fuel prices feeding into transport costs, production expenses and food prices.
"As a net oil importer, Kenya faced rising energy costs with broad pass-through to transport, production, and food prices, disproportionately affecting vulnerable households," the bank says.
"Elevated costs, heightened global uncertainty, and trade disruptions affect economic activity, reducing GDP growth and weakening investment, particularly in the private sector."
The report says the conflict has also raised Kenya's import bill and disrupted major trade routes, increasing pressure on the country's external accounts.
It notes that higher fuel import costs, weaker demand from export markets and increased transport expenses have all added to the strain.
"High-frequency indicators suggest that exports declined by around 6 percent in March 2026 compared with March 2025, while the petroleum import bill increased by about 21 percent over the same period," the report says.
The World Bank says the current account deficit widened by about 0.9 percentage points in March this year compared with March 2025.
The report explains that the poverty estimates are based on microsimulation, a computer modelling method used to estimate how economic changes affect individuals and households.
It also says the conflict has placed extra pressure on government spending because of higher global fuel prices and measures introduced to cushion vulnerable families.
The lender estimates that about 3.3 million Kenyans are facing severe food insecurity after successive failed and below-average rainy seasons.
Kenya's economy expanded by 4.6 percent in 2025, down from 4.7 percent in 2024. Private consumption, which accounts for nearly three-quarters of Gross Domestic Product, also slowed, growing by 4.7 percent compared with 6.2 percent in the previous period.
To support families most affected by the crisis, the government released Sh778 million in cash transfers to more than 133,000 vulnerable households in the hardest-hit counties. The Cabinet also approved another Sh4.1 billion to expand drought response measures in affected areas.
Even with these challenges, the World Bank says Kenya still has room to strengthen its economy by building resilience and supporting more inclusive growth in the medium term.