Middle East Conflict Raises New Risks for South Africa’s Economy

The latest conflict in the Middle East has created a new layer of global uncertainty that South Africa cannot ignore, particularly given the country’s exposure to energy prices, capital flows and exchange-rate movements.

According to Thys van Zyl, CEO of Everest Advisory Services, the immediate risk is not only geopolitical but also macroeconomic due to South Africa’s open economy. “When tensions in the Gulf region escalate, oil prices, risk appetite and the dollar usually move first – and emerging markets such as South Africa tend to follow.”

A key risk is the Strait of Hormuz, a critical route through which a large share of the world’s oil exports passes. Any sustained disruption or closure could quickly lead to a sharp increase in crude oil prices.

“Even if South Africa is not directly involved in the conflict, we are indirectly exposed. Higher oil prices push up fuel costs, increase logistics expenses, and ultimately place pressure on inflation and economic growth,” says Van Zyl.

In the short term, an oil price shock could affect South Africa through fuel prices that quickly filter through to transport and food costs, rand volatility as investors move toward “safe-haven” assets, and rising inflation expectations, which could limit the Reserve Bank’s room for interest rate relief.

“Even if core inflation remains contained, a fuel-driven increase in the cost of living could force the Reserve Bank to wait longer before considering rate cuts,” warns Van Zyl. He adds that the greater risk arises if disruptions persist for longer than six months and markets begin pricing in a more permanent supply shock.

“In such scenarios, analysts have already warned that Brent crude could rise to around $110 per barrel if flows through Hormuz are severely restricted. If this happens, the impact will not be limited to fuel prices, but could become a broader growth and stability problem. We would then be looking at stronger inflationary pressure, a weaker rand, and a heavier burden on both households and businesses,” says Van Zyl.

Against this backdrop, South Africa’s diplomatic position remains a sensitive factor. Strained relations with the United States and Israel could – particularly during a period of heightened geopolitical tension – contribute to higher risk premiums on South African assets.

The South African Reserve Bank has already emphasised in recent commentary and risk discussions that geopolitical tensions and their potential impact on trade and financial conditions could affect the country’s inflation and growth outlook.

“The core message is simple: South Africa cannot afford to absorb another external shock without improving policy certainty and diplomatic pragmatism. In a world where capital moves quickly, foreign policy increasingly becomes an economic variable,” says Van Zyl.

“The coming weeks will determine whether this conflict remains a short-lived shock, or whether it marks the beginning of a longer energy and inflation chapter for 2026.”

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Author: Sya Potgieter from Everest Wealth on behalf of Everest Wealth.

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