How the Middle East conflict is driving up oil prices and threatening South Africa’s economy

Oil prices remain elevated compared with levels seen at the end of February, keeping inflation and interest-rate concerns firmly in focus. South Africa’s economic outlook is facing fresh uncertainty as the conflict in the Middle East drives oil prices higher, raising inflation risks, putting pressure on the rand and dimming hopes of an interest-rate cut later this month. Investec chief economist Annabel Bishop said on Thursday that the country’s economic growth this year will depend heavily on how long the conflict lasts.

South Africa’s grossdomestic product growthis currently forecast at 1.5% year-on-year in 2026, although risks are tilted to the downside should the war drag on. The 2025 figure, at 1.1%, was below the Bloomberg consensus of 1.3%. While the conflict has heightened concerns about global economic growth, Bishop said a severe economic shock is not currently expected.

Instead, a mild to moderate impact on South Africa’s economy is more likely, with oil and related petrochemical supply not expected to face prolonged disruptions. However, global markets have already begun reacting to the conflict, with oil prices surging and investors shifting into safer assets. Trading Economics said the rand weakened towards R16.40 per US dollar as traders sought refuge in the dollar amid heightened inflation risks linked to the Iran conflict and volatile oil prices.

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“The rand has been under pressure recently, weighed down by global risk aversion and volatile oil prices, a particular concern for South Africa as a net fuel importer,” it said. Brent crude futures surgedabove $100 a barrel before trimming gains, marking a second straight session of increases as supply fears in the Middle East overshadowed efforts by major economies to release emergency oil reserves. Developed countries are releasing oil as supply dwindles. The Strait of Hormuz, which carries roughly a fifth of global seaborne oil supply, remains effectively shut amid the conflict, while attacks on shipping and energy infrastructure have heightened supply concerns.

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