Mideast war: Treasury rallies to cushion blow

The US–Israel assault on Iran is sending tremors through global energy markets, raising the risk of higher fuel prices, accelerated inflation and delayed interest rate cuts in South Africa. As the conflict escalates across the Middle East, even a limited disruption to oil flows through the Strait of Hormuz could quickly feed into South Africa’s fuel price, pushing up inflation and complicating the country’s fragile economic outlook. The national treasury was modelling possible economic scenarios as global markets reacted to the conflict, Finance Minister Enoch Godongwana said in an interview with theMail & Guardianthis week.

South Africa imports most of its fuel and therefore has little control over global price movements. “My team is building a scenario plan to assess the implications, depending on the extent of the problem. Insofar as fuel is concerned, we are a price taker because we are not a producer of gas or oil,” he said.

“For that reason … it is likely to have serious implications for us if the situation remains unresolved.” Higher oil prices feed directly into inflation which, in turn, influences interest rate decisions and borrowing costs across the economy. Slower growth would weaken revenue projections and place additional pressure on the debt trajectory outlined in the 2026 budget. Recent history shows how quickly geopolitical shocks can derail fiscal planning, Godongwana said, recalling how Russia’s invasion of Ukraine had transformed global energy markets almost overnight: “In 2022 I delivered the budget.

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I woke up the next morning and Dr Pieterse (senior treasury official) said: ‘Minister, your numbers are gone.’” “That is the environment in which we operate,” Godongwana said. The risk to South Africa lay in how quickly instability in the Middle East could ripple through global energy markets, economists said. The main economic risk lay in how energy markets responded to instability around the Strait of Hormuz, noted Daniel Meyer, a professor of economics at the University of Johannesburg.

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