27 April 2026 | Article | Economic Insight | 3 min read
Global conflict, local economic consequences
The ongoing war in the Middle East is already causing spillover effects on the rand and oil markets. With South Africa importing most of its crude oil and refined fuel, the movements in international oil prices and fluctuations in the rand-dollar exchange rate will have a major influence on domestic fuel prices.
When oil prices rise, the rand weakens simultaneously, making imports more expensive. From its peak earlier in 2026, the rand had fallen by 8.6%, as Brent crude prices rose above $107 per barrel as of late April 2026; having surged from below $70 per barrel at the start of the year to above $120 per barrel at its peak, an increase of over 70%. Investors moved their money into safer assets, and with the currency under pressure, capital shifted toward the US dollar rather than emerging market currencies, resulting in an outflow from riskier assets such as equities. The increase affects producers as they will incur higher costs in almost every stage of the supply chain, which then feeds directly into inflation. Global oil prices have increased significantly during the Middle East conflict, leading to estimated producer cost increases of 10%–25% in fuel-dependent sectors.
The Cape route opportunity and its limitations
The temporary closure of the Strait of Hormuz, which has restricted nearly all tanker traffic since early March 2026 with no confirmed timeline for reopening, may lead to increased shipping traffic to South Africa, as major shipping companies reroute via the Cape of Good Hope to avoid conflict-affected areas. This could potentially result in additional revenue for South Africa's economy, provided that the ports have the capacity to handle the demand.
Despite the increased shipping traffic, fuel price inflation, rand pressure, and supply chain disruption outweigh the potential benefits. The primary driver of this imbalance is operational, South Africa's port infrastructure is insufficiently efficient to convert increased traffic into proportional revenue. Until that structural constraint is resolved, the Cape route opportunity remains largely theoretical.
Outlook and Implications for South African businesses
The adverse economic impacts materially outweigh the near-term benefits. The SARB and IMF both project that fuel-driven inflation will remain elevated through the second quarter of 2026, placing further pressure on input costs across the economy. Businesses that act now, mapping their fuel-exposed cost lines and reviewing supplier arrangements, will be better positioned than those waiting for prices to normalise.
Authors
- Kemitshetjo Mphahlele | Financial Advisory Consultant
- Mapheko Matjila | Risk Advisory Consultant
- Joshua Zumbika | Operations Director
Edited by Nthato Leboli
Key Sources
- SARB Monetary Policy Committee Statement, March 2026
- SARB Quarterly Bulletin, March 2026
- IMF World Economic Outlook, April 2026
- IMF Blog: How the War in the Middle East Is Affecting Energy, Trade, and Finance, March 2026
- International Energy Agency — Global Oil Market Reports, 2026
- Statistics South Africa — Fuel and CPI Data