As the Iranian conflict escalates, how are global financial markets reacting? Discover the latest trends and what they mean for investors.
Image: File
Financial markets across globally, as well as in South Africa contracted strongly last week.
On the JSE the sell-off continued, bonds were sold, and the Rand depreciated sharply against all three major currencies.
The Iranian conflict not only intensified, the embargo on oil tankers moving through the strait of Hormuz increased the possibilities that international oil prices not only remain under pressure but increase risks that oil stock will dry up.
On the JSE the ALSI lost another 3.4% over the last seven trading days as the index closed Friday 13 531 points lower or 10.53% on 114 924, from its record high of 128 455 on 27 February 2026, the day before the first attack of Israeli and US forces on Iran.
The Resources 10 index lost the most by -18.0% since the end of February.
The gold price lost 4.6% and the platinum near 14.00% since the start of the conflict. On the foreign exchange market, the Rand depreciated the last two weeks by 100 cents (or 6.20%) from R15.94/$ on Friday 27 February to R16.94/$ at the close of last Friday 13 March, as foreign investors sold South African shares and bonds.
Against the Pound the Rand since the beginning of the Iran crisis, lost 98 cents to R22.44/£ and against the Euro 663 cents to R19.44/€. The Rand now trades at its worst levels against these three currencies since the beginning of the year.
On the brent oil market, the price per barrel increased by $33 since the end of February, with prospects of further sharp increase as the Middle East conflict continues. Greenpeace Germany reported that 68 loaded oil tankers are stranded in the Persian Gulf, and many more are avoiding the region.
Al Jazeera reports that Iran's Revolutionary Guard has targeted multiple oil tankers and commercial ships with drones and explosives-laden boats, leading to stalled operations in some areas. The strait of Hormuz usually oversees 20% of global oil shipments
The current price of $103 per barrel and the Rand at R16.94/$ is likely to push the price of petrol up by between R4.30 and R4.50 per liter and that for diesel by higher than R7.00 per liter. Consumers also must pay the increase fuel levies of 21 cents per liter announced in the budget from the beginning of April 2026. By Thursday last week, the price for petrol was already under recovered by R3.97 per liter and that of diesel by R6.63/$.
U.S. stocks were sold off for the second week in a row, given the increasing risk for holding risky assets by investors.
On Wall Street, The Dow Jones Industrial index traded down by 1.8% last week and by 4.7% since the start of the US/Israel operation against Iran. In Europe, the Euro Stockx50 tumbled by 6.7% over the last two weeks, the FTSE100 in the Uk traded down over the fortnight by 6.1%, the Hang Seng in Hong Kond lost since the start of the conflict by 4.4% and the Shanghai index in China was the least affected losing only 1.7%
This coming week, it is expected that further pressure on the oil price and a weaker rand will continue, till some indications emerge that oil tankers are moving again through the strait of Hormuz.
Apart from these challenging expectations of surging oil prices, and bearish movements in risky asset investments, STATSSA will release South Africa’s inflation rate for February on Wednesday.
It is expected that the increase in the CPI will be 3.4% against the 3.5% in January. This means that currently the rate remains within the inflation rate target of 3% to 4%.
Inflation expectations for the next few weeks will increase substantially, given prospects of surges in petrol and food prices.
The next interest rate decision of the Monetary Policy Committee (MPC) on interest rate will be on March 26. STATSSA will also publish the latest retail sales on Wednesday.
Globally investors await the Federal Reserve’s FOMC meeting decision on interest rates this coming Thursday.
Most analysts expect that the FED will keep its Bank Rate on hold at 3.75%. Elsewhere the Bank of Japan and the Bank of England will release their interest rates decisions, and the Euro zone will announce the Zone’s inflation rate for February. These decisions and numbers are all under a mist of uncertainty over the next few months and financial markets are expected to be weaker.
Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
Image: Supplied
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