SA could be a big loser in Middle East conflict: Oil surges, stronger dollar hits rand

2026-03-02 - 11:44

South Africa is not in any way involved in the ongoing Middle East conflict; however, the country is set to pay a hefty price for the tension. The world changed over the past weekend when the United States and Israel carried out major strikes on Iran that killed Supreme Leader Ayatollah Ali Khamenei. Iran has retaliated with missile and drone attacks across parts of the Middle East. Following the two incidents, the price of oil has increased significantly, and the dollar has strengthened against the rand. The sudden change shows how fast political tensions in a key global energy region can affect markets around the world. The numbers are already moving, and here is how South Africans are set to feel the pinch of the conflict. ALSO READ: Ramaphosa calls for ‘maximum restraint’ as Middle East crisis worsens Oil prices increase By midday on Monday, Brent crude oil was trading at $78 a barrel, up from $72.48 on Friday. Reports indicate that Middle East leaders have privately warned Washington that a war with Iran could push oil above $100 a barrel. Professor Waldo Krugell, an economist at the Faculty of Economic and Management Sciences at North-West University (NWU), told The Citizen there will be pressure on fuel prices in South Africa, at least in the coming month. The Strait of Hormuz, a key shipping route through which about 20% of the world’s oil moves every day, is effectively closed. Overall traffic in the area has already fallen by about 75%. This is the first time the route has been closed; Krugell noted that even back in the days of the Iran-Iraq war, they managed to keep it open. South Africa imports all of its oil. The country pays in dollars, but uses the rand. When Brent crude oil spikes, petrol prices follow within weeks. That means higher transport, food, and retail costs, and interest rate cuts getting pushed further out. Petrol prices to increase The warning of a petrol price increase comes days after Finance Minister Enoch Godongwana announced a hike in the fuel levy, which is set to kick in on 1 April. Another move to put pressure on motorists’ wallets. “I think we have already expected some increases, and I think it is going to continue in the month after that as well,” said Krugell. “The consensus is that the oil price in the high 70s is about $8 to $10 higher than it should be, if you look at demand and supply. That premium has everything to do with uncertainty about oil coming out of those Gulf States and whether they will be able to keep the flow going in the Strait of Hormuz.” The Department of Mineral and Petroleum Resources on Monday announced a petrol price hike for March. Petrol is set to rise by 20 cents per litre, while diesel will increase by 62 cents and 65 cents per litre. ALSO READ: Iran launches fresh strikes across Gulf after vowing revenge for slain leader Dollar gains strength against the rand When the market opened on Monday, the rand traded at 16.16 against the dollar, about 1.4% down from its Friday close. Like other currencies that react strongly to market uncertainty, the rand is influenced by global factors, as well as the domestic economic data. The dollar rose by 0.2% compared to other major currencies, while gold, one of South Africa’s key exports, climbed to its highest level in over a month. “When there is this much uncertainty, emerging market currencies tend to weaken,” said Krugell. “I think the higher gold price is probably good for the rand but not enough to offset the higher crude oil price.” What does the future hold? Much will depend on what happens in the coming days, weeks and months. However, Krugell believes motorists will pay extra for petrol and diesel for a month or two. “If it lasts longer, we will have a tough time,” he added. “The currency is slightly trickier to tell if the conflict’s drawn out, and you have all sorts of asymmetric conflicts where you have major bombing coming from the sky, but the Iranians are running around almost more terrorist style, shooting at oil tankers and planes, and things like that. “Then I think other dynamics will be more important for the currency than just the fact that there’s this sort of global uncertainty.” When it comes to the closure of the Strait of Hormuz, Krugell supposes that the danger is not a real blockade, because the US can easily break one. “Insurers already do not want oil tankers to go through there, and those tankers are piling up on both sides of the Strait,” said Krugell. NOW READ: Middle East turmoil leads to flight chaos and ‘significant’ financial losses in SA