African dollar bonds are facing significant pressure as the Iran war prompts investors to seek safety in the US dollar, driving up borrowing costs across the continent. The African risk premium over US Treasuries jumped 17 basis points to 367 basis points Tuesday, marking the largest daily increase since October, according to JPMorgan data.

This widening of spreads has hit African issuers harder than emerging markets in Latin America, Europe and Asia, which saw increases of only 4 to 11 basis points. Kenya and South Africa bonds have been among the worst performers, while distressed Senegal saw yields on 2031 notes rise to 18.32%, the highest in nearly a month.

The market turmoil reverses a recent trend of declining borrowing costs that had benefited from fiscal reforms in Nigeria and South Africa, credit rating upgrades for Ivory Coast, and IMF support for Kenya and Egypt. Portfolio managers expect African issuers to stay sidelined from global credit markets for at least two to three weeks as investors reduce risk exposure.