South Africa is facing renewed economic pressure as rising global oil prices and persistent supply disruptions threaten to push fuel costs higher while delaying any potential interest rate relief.
Analysts warn that even if tensions between the United States and Iran ease in the near term, the global energy system will take months—if not years—to stabilise, leaving import-dependent economies exposed.
Global energy shock expected to linger
According to Philip Robotham of Schroders South Africa, the fallout from the conflict has significantly disrupted oil and gas markets since late February.
He noted that global oil inventories are likely to decline sharply in the coming months, with some regions approaching critical levels. While tanker activity may resume quickly after any ceasefire, damaged oil fields and refinery shutdowns continue to limit supply.
Roughly 2.2 million barrels per day—around 2% of global refining capacity—remain offline, with an additional 3 to 4 million barrels per day of production halted. Countries such as Kuwait and Iraq have indicated that restoring output could take several months once stability returns.
The natural gas sector faces even deeper structural challenges. Around 17% of Qatar’s liquefied natural gas output has been affected, with recovery timelines stretching up to four years.
As a result, oil prices are expected to remain elevated. Market projections suggest prices are unlikely to fall below $75 per barrel, even under favourable conditions, while prolonged disruptions could push prices above $100.
Pressure builds on South Africa’s economy
For South Africa, the consequences are immediate and far-reaching. As a net importer of fuel, the country is highly sensitive to global price movements, which feed directly into petrol and diesel costs.
Recent increases have already been significant, with April seeing hikes of approximately 3兰特 per litre for petrol and 7兰特 for diesel. Early indicators suggest further increases could follow in May.
Higher fuel prices are also feeding into broader inflation, raising costs across transport, manufacturing and retail sectors.
Lesetja Kganyago, governor of the South African Reserve Bank, has cautioned that the inflation outlook makes near-term rate cuts unlikely.
Speaking on the sidelines of meetings hosted by the International Monetary Fund and the World Bank Group in Washington, Kganyago said the central bank is navigating an environment of heightened uncertainty.
He emphasised that rising commodity prices—including fuel and fertilisers—are expected to weigh on economic growth while pushing inflation higher.
South Africa’s benchmark interest rate was held at 6.75% in its most recent decision, with policymakers opting for caution amid volatile global conditions.
The central bank has shifted toward scenario-based forecasting to better assess risks, particularly as earlier projections—such as oil averaging $94 per barrel—are now being overtaken by rapidly changing market realities.
While no fuel shortages are currently anticipated, the broader economic impact remains uncertain, particularly for sectors such as agriculture that rely on fertiliser inputs.
Source: Reuters, Schroders South Africa, SARB statements
