The re-escalation of hostilities between the United States and Iran is threatening to extend South Africa’s fuel price crisis and delay any prospect of interest rate relief, according to Frank Blackmore, Lead Economist at KPMG South Africa, as fresh military strikes reignite uncertainty over global oil supply at a moment when South African households and businesses can least afford it.
Speaking in response to the latest developments in the conflict, Blackmore said the situation had deteriorated sharply. “The latest from the war in Iran is that hostilities have again increased,” he said. “News reports indicate that the US has attacked various Iranian targets in retaliation for a helicopter that was shot down by the Iranian armed forces. This has led to attacks even in the neighbouring countries of the region and is obviously not good in terms of the ceasefire we have had over the last few weeks.”
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The conflict, which began on 28 February 2026 when the United States and Israel launched strikes against Iran, has fundamentally reshaped global energy markets. Brent crude briefly surged to $119.50 per barrel in early March — its highest level since Russia’s invasion of Ukraine in 2022 — before settling above $100 per barrel, where it has broadly remained. The Strait of Hormuz, just 33 kilometres wide at its narrowest point, carries approximately 20 million barrels of crude oil and petroleum products per day — roughly one-fifth of global petroleum consumption and over a quarter of all seaborne oil trade.
The critical question now is whether that chokepoint remains effectively closed. Blackmore offered a nuanced assessment. “Iran has indicated that the Strait of Hormuz is absolutely shut at this point,” he said, “but there is news to the contrary that indicates that — especially at night — lots of ships are going completely dark, so they kill all the lights and the communications, and are trickling through the Strait of Hormuz. I suspect, as was the case throughout the entire war, a certain amount of crude and other commodities has been moving through the Strait and continues to do so.”
Despite that partial flow, the economic consequences for South Africa have already been severe. South African motorists faced a 14% increase in petrol prices in May 2026, alongside a near-24% increase for diesel, as the country’s regulated fuel pricing system transmitted global oil market shocks directly to the pump. The JSE plunged 9.2% in the first week of March, virtually wiping out its year-to-date gains and erasing roughly R2 trillion from the bourse’s overall market capitalisation. South Africa recorded fuel price increases of approximately 30% for petrol and more than 60% for diesel between late February and early May 2026 — among the most severe increases recorded in the southern hemisphere during the period.
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The government has intervened to provide temporary relief. The Minister of Finance, in consultation with the Minister of Mineral and Petroleum Resources, announced a temporary reduction in the general fuel levy of 300 cents per litre for petrol and 393 cents per litre for diesel, in effect from 6 May to 2 June 2026. Those relief measures are expected to cost the fiscus approximately R17.2 billion in lost tax revenue — a significant fiscal burden for a government already navigating constrained finances. The levy relief has been substantially reduced from June onwards and is expected to fall away entirely in July, meaning consumers face the full weight of elevated oil prices at the pump from the third quarter of 2026.
Blackmore was direct about the economic implications of any further escalation. “The hostilities are not a favourable outcome currently and will only mean an extension of the higher oil prices,” he said. “Therefore, the inflationary conditions faced by most countries around the world means potentially higher interest rates would be on the cards, and lower economic growth as a consequence of those higher rates.”
That warning is already materialising. South Africa’s Reserve Bank raised the repo rate to 7% amid ongoing US-Iran tensions — a decision that reversed the easing cycle that had been widely anticipated at the start of 2026, when inflation was moderating and rate cuts were the consensus expectation. Standard Bank’s group head of South African macroeconomic research, Dr Elna Moolman, had warned as early as March that interest rate cuts would likely be delayed given the inflationary impact of the war-driven surge in oil prices.
The shock extends beyond fuel. Gulf states supply approximately 45% of global sulphur and 50% of global urea exports — both critical inputs to fertiliser production — with a six-to-nine month lag before supply disruptions feed into food prices across South Asia and East Africa. For South Africa, where food absorbs a disproportionate share of lower-income household spending, the secondary inflation wave from fertiliser and food price increases represents a risk that has not yet fully materialised.
Ocean carriers have been diverting vessels away from the Red Sea and Suez Canal route, instead sailing the considerably longer route around the southern tip of South Africa — a development that has increased shipping volumes through South African waters but has not translated into any meaningful economic benefit, as the rerouting adds cost and delay to global supply chains without generating local value.
The trajectory of the conflict remains deeply uncertain. A ceasefire held for several weeks before the latest round of strikes, and diplomatic channels remain open despite the military escalation. What is clear, Blackmore concluded, is that as long as hostilities continue, the economic consequences — for South Africa and for the global economy — will continue to accumulate.