Even a moderation to the $90 range would still leave prices higher than a year ago, with elevated levels expected to persist through 2026.
Image: Pixabay
The ongoing conflict in Iran has triggered a prolonged economic shock, with global repercussions for businesses and consumers. Oil prices have been volatile, with Brent crude reaching $107 in early April and forecasts indicating prices could remain above $95 in the near term.
Even a moderation to the $90 range would still leave prices higher than a year ago, with elevated levels expected to persist through 2026.
Disruptions around the Strait of Hormuz are unlikely to be resolved quickly, with time needed to restore confidence in shipping routes, rebuild production capacity and stabilise supply agreements.
For consumers, the impact is expected to be significant. Higher fuel prices will directly affect costs at the pump, while also feeding into broader inflation, given fuel’s role as a key input across the economy. Rising inflation is likely to erode disposable income and weaken real purchasing power.
This could slow inflation-adjusted income growth in 2026, following a stronger 3.3% increase in 2025. There is also a risk of interest rate hikes, while job creation may come under pressure if global growth slows.
The combined effect is expected to be felt through higher transport and food costs, increased bond repayments and wages that struggle to keep pace with living expenses.
Pressure is already visible in consumer credit trends. Unsecured lending is expanding faster than other credit categories, with more frequent borrowing but smaller loan sizes. This suggests consumers are increasingly using credit to cover monthly expenses rather than for asset acquisition.
In the first two quarters of 2025, loan originations rose by 41%, while average opening balances declined by 13%. The trend is particularly pronounced among lower-income groups.
Despite these pressures, the current environment may accelerate long-delayed economic reforms in South Africa. Reduced support from favourable global conditions could push policymakers to prioritise structural changes aimed at boosting growth.
Recent improvements in electricity supply, progress on rail concessions and a major port concession in Durban indicate movement in key sectors. The Government of National Unity (GNU) has also signalled a stronger focus on economic performance amid growing geopolitical uncertainty.
However, with reforms expected to take time, households are being urged to act proactively to manage their finances. Reducing large fixed costs, such as housing and vehicle expenses, can provide immediate relief by lowering instalments and associated costs like insurance and maintenance.
Transport expenses also remain a key pressure point, with options such as lift clubs offering potential savings. Cutting discretionary spending — including takeaways, subscriptions and non-essential services — can further ease financial strain.
Maintaining a healthy credit record is increasingly critical in the current climate. Consumers are advised to prioritise essential debt obligations, budget carefully and avoid taking on unnecessary new credit.
Reliance on unsecured loans to cover basic expenses may increase long-term financial risk, while debt review should be considered only as a last resort due to its impact on future access to credit.
While economic reform may strengthen long-term growth prospects, the immediate outlook remains challenging. In the interim, financial discipline and prudent credit management are likely to be key to navigating ongoing uncertainty.
IOL