Rising tensions in the Middle East have lifted oil prices and pressured the rand, increasing the risk of higher fuel costs for South African consumers.
Image: ChatGPT
OIL prices are rising sharply amid escalating tensions in the Middle East, as the US and Israel intensify their military actions against Iran, leading to fears of a global energy crisis.
The attacks on the Islamic state have upended regional energy flows, with the crucial Strait of Hormuz — through which about a fifth of global oil transits — effectively closed off. The conflicts have also fuelled fears of a fresh energy crisis that could ramp up inflation.
Market moves have been comparatively mild amid hopes that the crisis will be short-lived and not cause a major problem for the global economy.
But analysts warned that the longer it goes on, the more painful it would be on the global economy as supply chains are hit and prices surge.
US President Donald Trump said the war, which began Saturday with a strike that killed Iran's supreme leader Ayatollah Ali Khamenei, was going "substantially" ahead of schedule but warned it could go on for more than four weeks.
He also for the first time laid out objectives — destroying Iran's missiles, navy and nuclear programme, and stopping its support for armed groups across the region — which notably did not include toppling the Islamic Republic.
The US State Department urged Americans to leave all of the Middle East from Egypt eastward.
Iran has responded by unleashing missiles and drones across the Middle East, including Lebanon, Saudi Arabia, Qatar and Dubai, while threatening explicitly to drive up global energy costs.
That sent oil prices soaring nearly 14 percent Monday before slightly easing, while European natural gas prices spiked almost 40 percent after Qatar's state-run energy firm said it had halted liquefied natural gas production.
Meanwhile, a general in Iran's Revolutionary Guards threatened to "burn any ship" seeking to navigate the Strait of Hormuz.
"We will also attack oil pipelines and will not allow a single drop of oil to leave the region. Oil price will reach $200 in the coming days," he warned.
Crude rose at least two percent on Tuesday, and the rise in energy costs could give most central bankers a headache as they look to bring down inflation while also cutting interest rates to support their economies. On Wednesday morning, it was trading at $78, which is 18% above its mid-February level. As a result, South Africans will likely face significant fuel price increases in April.
AFP