The rand is taking a beating as markets stick to a risk-off stance, worried about prolonged conflict in the Middle East and the resulting disruptions to global oil supplies.
The rand has depreciated over the month, rising to R17.25/$ on Monday (23 March), driven by market concerns over the US-Israeli war in the Middle East against Iran.
Markets have been swinging wildly since the United States launched its “Operation Epic Fury” against Iran on 28 February 2026, with oil futures hit hardest.
According to Investec Chief Economist Annabel Bishop, markets are particularly worried about the duration of the shipping disruption in the Strait of Hormuz, which is raising oil prices and supply concerns.
Markets saw wild swings on Monday, following a social media post by US President Donald Trump that the US had entered into discussions with Iran to rein in and end the conflict.
According to Trump, the United States had entered into “very good and productive conversations” with Iran about a “complete and total resolution” of hostilities in the Middle East.
The US president said that he instructed the US Department of Defence (War) to postpone military strikes for five days, pending the success of the discussions.
Trump’s post followed weekend posts where he gave Iran an ultimatum to open the Strait of Hormuz within 48 hours, or else suffer attacks to its energy infrastructure.
Following Trump’s latest post about ending the war, markets showed a sharp recovery, with oil prices pulling below $100 a barrel and riskier currencies strengthening.
The rand pulled back below R17.00/$, hitting an intra-day best of R16.74/$ by 11h00.
However, things quickly swung back the other way after Iran denied that any talks were taking place. The country’s Foreign Ministry said it was not engaged in any direct or indirect talks with the United States.
Oil prices pushed back above $100 a barrel, and the rand weakened. By 15h40, oil was trading at $103 a barrel, and the rand was at R16.86/$.
South Africans will feel the pain
According to Bishop, with oil prices over $100 a barrel, South African motorists are set to suffer greatly.
Fuel price recovery data shows that the diesel price increase for 1 April is now above R9.00/litre, while petrol is set to rise by R5.42/litre and illuminating paraffin close to R11.00/litre.
Economies are energy-intensive, and South Africa’s supply chain is heavily diesel-intensive. Fertiliser costs have already risen, and South Africa imports around 80% of its fertiliser needs, she said.
Fertiliser typically accounts for 35%-50% of production costs for grain and other key crops, potentially leading to reduced application rates and lower yields on fertiliser-intensive crops like maize.
Ultimately, this will lead to elevated food prices for consumers.
Bishop noted that this will impact South Africa’s economy as a whole, considering agriculture was a substantial driver of economic growth last year.
“This year, [there is] risk from higher costs and squeezed supply,” she said.
The rand, meanwhile, will remain vulnerable to shifts in global financial market sentiment, with the intensification of the Middle East war worsening risk-off sentiment and so causing the effective rand to weaken further, she said.
The unit has also lost close to 5.0% since the start of the war.
Taking the whole picture into account, inflation concerns have elevated, the economist said, and concerns over fuel supply have also risen.
For interest rates, hopes of near-term cuts have all but disappeared, with the Reserve Bank’s Monetary Policy Committee expected to announce a hold later this week.
“While President Trump has said he does wish to wind down the war, and has lifted sanctions on Iranian oil, markets are currently looking for hikes, not cuts, in interest rate cycles now,” she said.
This is also weakening the rand, she added.
