JSE slides below 115 000 points amid Middle East oil shock

The JSE All Share Index closed the week at 114 924 points as global markets reacted to escalating conflict in the Middle East and the resulting surge in oil prices.

Over the past month, the index has lost just over 3% as investors have become more defensive amid heightened geopolitical tension and volatile energy prices.

Read:
SA stocks set for a 10% correction as losses deepen
Higher oil prices could dent SA growth – Standard Bank

With oil prices climbing above $100 a barrel amid the escalating war in the Middle East, investor sentiment turned sharply negative.

On the JSE, resource stocks were among the biggest losers on Friday.

Impala Platinum dropped around 10%, Northam Platinum fell about 8%, and Sibanye-Stillwater declined roughly 7%.

Not all shares were weaker. Sasol – which typically benefits from higher oil prices – jumped 10%, while Naspers and coal producer Thungela gained about 4% and 3%, respectively.

Read:
Brent oil closes above $100 for first time since August 2022
Oil shock: Brace for R5/l to over R8/l SA fuel spike
Sasol has nearly doubled in 12 months, but is it still cheap?

Omri Thomas, director at Abax Investments, says a large part of the JSE’s decline over the past two weeks has been driven by resource stocks.

“However, if you take one step back and compare current prices with those of three months ago, the decline does not appear as dramatic.”

He cites Impala Platinum as an example. Although the share price is down about 30% for the month, it remains roughly 5.5% higher than it was three months ago and about 117% higher than a year ago.

ADVERTISEMENT

CONTINUE READING BELOW

He cautions that markets could still move significantly lower.

Rand on the back foot

The rand has also experienced a volatile week.

The currency briefly weakened to around R16.92 to the dollar earlier in the week – a three-month low – before recovering somewhat and trading in the R16.30 to R16.49 range midweek.

Renewed pressure linked to elevated oil prices and geopolitical uncertainty later pushed it back toward R16.85 on Friday evening.

Listen: Simon’s weekly wrap: Oil, food, tech and the price you’ll pay

Thomas says the factors that previously supported the rand have now reversed. “But the rand’s reaction to the dollar is logical, given the circumstances.”

He warns that if oil prices do not turn lower quickly, South Africa’s trade balance could come under significant pressure.

“And petrol prices could potentially increase by about R5 a litre and diesel by as much as R7. This would completely change South Africa’s inflation outlook.”

SA’s oil vulnerability

ADVERTISEMENT:

CONTINUE READING BELOW

South Africa’s reliance on imported oil makes the local economy particularly sensitive to global energy shocks.

Gavin Kelly, chief executive of the Road Freight Association, notes that most of the petroleum products consumed in South Africa are imported, meaning that international price movements feed directly into local fuel costs.

“For an economy like South Africa that imports oil, the outcome is often inevitable: higher domestic energy prices,” he notes in a media statement.

The effects extend far beyond the petrol pump.

“Once fuel prices increase, the cost of moving goods from agricultural, mining and production sites to manufacturing and distribution centres and finally to retailers is exposed to these input price increases,” Kelly says.

Meanwhile, the conflict between the United States, Israel and Iran has intensified following air strikes on 28 February that killed Iran’s Supreme Leader, Ali Khamenei.

Of particular concern is the Strait of Hormuz, through which about a fifth of the world’s oil exports pass. Shipping through the strait has been severely disrupted since the conflict escalated.

Read/listen:

From crude to CPI: how oil swings shape inflation and rates
Spiralling oil prices could spell trouble for SA agriculture … and consumers
Higher oil prices may cloud interest rate path – FNB

The International Energy Agency says the crisis could become the largest supply disruption in the history of the global oil market. Crude and oil product flows through the strait have fallen from about 20 million barrels a day before the conflict to almost zero.

The disruption has pushed oil prices sharply higher. Late on Friday, Brent crude was trading just over $100 a barrel.

‘Watch the next two weeks’

Bianca Botes, director at Citadel Global, says the next two weeks may shape the economic outlook for the rest of 2026.

ADVERTISEMENT:

CONTINUE READING BELOW

According to Botes, markets are particularly focused on developments around the Strait of Hormuz.

“Each day the waterway remains effectively closed extends the supply deficit that no reserve release can fully offset.

“Any credible signal that traffic is resuming would move markets faster than policy announcements.”

She adds that while a de-escalation scenario remains possible, investors can no longer assume that energy markets will quickly normalise.

“The base case, which remains possible, is that the conflict eases within weeks and allows energy flows to normalise. But it is no longer the only scenario that needs to be considered.”

Economists are increasingly concerned about the potential macroeconomic fallout if oil prices remain elevated for an extended period.

Oxford Economics says a scenario in which Brent crude averages around $140 a barrel for two months – combined with tighter financial conditions and supply-chain disruptions – could be enough to push parts of the global economy into a mild recession.

Using its Global Economic Model, the consultancy estimates that such a shock could see global real GDP decline by roughly 0.7% by the end of 2026.

Read: Over R2trn JSE wipeout

#JSE #slides #points #Middle #East #oil #shock