Dollar safe-haven bid, spiking oil prices and fresh inflation worries send the rand on a roller-coaster ride.
Middle East Tensions: The South African rand was knocked off course this week after the United States bombed three Iranian nuclear facilities, jolting already-fragile global markets. The greenback’s “safe-haven” glow pulled USD/ZAR briefly to R18.15/$ on Monday, its weakest level in a month, before easing back toward R17.75/$ by Wednesday morning as traders reassessed the fallout.
Why the Rand Buckled
Currency desks barely had time to sip their morning coffee when news of the strikes broke. Risk-averse investors piled into the dollar and gold, leaving emerging-market units—led by the rand—on the ropes. Investec chief economist Annabel Bishop notes that local drivers have taken a back seat for weeks; dollar momentum is “calling the tune” for the rand right now.
Oil: The Inflation Wild-Card
Brent crude spiked above $80/bbl in the immediate aftermath of the strikes, stoking fears of cost-push inflation and dearer petrol back home. Markets then cooled, with Brent sliding to $71.48/bbl once signs of de-escalation emerged—proof that headline risk cuts both ways.
Dollar’s Safe-Haven Status Isn’t Bullet-Proof
According to deVere Group CEO Nigel Green, the dollar’s refuge status “may rally initially, but this isn’t a clean, safe-haven story.” If pricier oil squeezes US consumers and slows growth, the greenback could lose some shine in coming months—opening the door for a rand rebound.
Scenario Planning: Where Could ZAR Land?
Investec’s latest modelling attaches:
- 50 % base case: R18.40/$ average by end-Q2 2025.
- 15 % upside: R17.50/$ under calmer geopolitics.
- 32 % downside: R20/$ if tensions spiral or US rates stay higher for longer.
Longer-term, Bishop still sees the rand edging firmer to ≈R17.90/$ by December, assuming oil and risk sentiment stabilise.
What It Means for South Africans
- Petrol Price Outlook: June’s oil gyrations are already being baked into July pump-price calculations; motorists should brace for a hike.
- Inflation & Rates: A temporary oil shock may nudge CPI toward the top half of the 3-6 % target band, but SARB is unlikely to hit the panic button unless second-round effects appear.
- Portfolio Playbook: A diversified mix of hard-currency assets, local inflation-linked bonds and gold hedges can cushion against rand volatility.
Key Risks to Watch
- Strait of Hormuz disruptions—about a fifth of global crude flows through the chokepoint.
- Retaliatory strikes from Iran that broaden the conflict.
- Local headwinds such as persistent load-shedding or fiscal slippage that could amplify external shocks.
Also read: Rand Struggles Due to Escalating Tensions in the Middle East