From Oil Shock to Domestic Inflation: Exchange-Rate Transmission of a Strait of Hormuz Disruption in the Democratic Republic of the Congo

This paper examines the transmission of oil-price shocks to inflation in the Democratic Republic of the Congo (DRC), using the 2026 disruption of the Strait of Hormuz as the motivating geopolitical episode. Using 62 weekly observations from January 2025 to March 2026, we estimate a short-run autoregressive distributed-lag model, ADL(2,1,2), with Newey–West heteroskedasticity- and autocorrelation-consistent standard errors. The results show substantial but dynamically stable inflation persistence. Brent-price increases have a positive but modest and transitory direct effect: a US$10-per-barrel increase raises weekly inflation by about 0.09 percentage point on impact, but the cumulative effect declines to about 0.04 percentage point. Exchange-rate variations exert a stronger and more persistent effect: a 1 percent depreciation of the Congolese franc against the US dollar is associated with a cumulative increase of about 0.22 percentage point. These findings identify the exchange rate as the main observable amplification channel for external price shocks in the highly dollarized Congolese economy. The results suggest that the analysis of energy shocks in dollarized economies should give particular attention to second-round effects, exchange-rate dynamics and inflation expectations.