Following President Trump's announcement of a two-week ceasefire, markets surged as oil prices dropped significantly, raising hopes for economic stability in South Africa.
Image: AFP / White House / IOL Graphics
Stocks on the JSE yesterday rose to the highest level in more than a month while the rand also strengthened as the markets reacted positively to US President Donald Trump’s announcement of a two-week ceasefire with Iran, bringing a temporary halt to hostilities in the Middle East.
The temporary ceasefire had an immediate impact on the domestic market, with the JSE benchmark index surging more than 6% to more than 122,000 index points, the highest since 4 March.
Mining stocks led the rally on the bourse, with Impala Platinum rising 16.3% to R268.44 per share, followed by Valterra, which rise 13.1% to R1 598.39 and Northam Platinum at 12.2% to R378.09 per share.
Oil prices also fell by 15% to $94 per barrel, an improvement from the highs of $115 per barrel that has been seen in recent weeks, as the ceasefire alleviated immediate fears concerning oil supply disruptions through the strategic Strait of Hormuz.
Nigel Green, CEO of advisory firm deVere Group, said the markets’ relief rally based on the US-Iran two-week ceasefire is understandable but misplaced. Green said oil prices are expected to remain structurally high despite this temporary reprieve.
“A 15% collapse in oil in less than a week and a near 4% jump in European equities tells you exactly what markets are doing. They’re pricing in a clean de-escalation. But that assumption looks far too optimistic,” he said.
“This is a 14-day window, not a permanent policy shift. You have a fifth of the world’s oil supply moving through a corridor that is still effectively under the influence of one of the parties to the conflict. That’s not stability. The current rally is being driven by relief, not resolution. The rally is getting ahead of reality.”
Market participants will need to closely monitor compliance with ceasefire terms and any diplomatic signals regarding shipping routes through the Strait of Hormuz.
Bianca Botes, managing director at Citadel Global, said that the announcement has been met with jubilation in global markets.
"As the world collectively breathes a sigh of relief, the focus now pivots to the sustainability of this ceasefire," Botes said.
"Analysts warn that any breakdown in negotiations could propel market sentiments back into a risk-off environment, with potential repercussions felt far beyond the confines of Washington and Tehran."
Frederick Mitchell, economist at Aluma Capital, said that the sudden global shift has delivered much-needed relief for South Africa.
While earlier price spikes still weigh on the outlook, Mitchell said this combined correction offers a critical window for economic stability, improved consumer confidence, and renewed growth momentum.
"Brent crude, which was flirting with the $111 mark just days ago, plummeted to $94 per barrel on Wednesday morning, a massive $17 drop. For South African consumers and the logistics sector, this is the breakthrough we have been waiting for," he said.
"Our fuel prices are directly pegged to international refined product costs via the Basic Fuel Price. This $17 correction alone provides a daily relief of approximately 212 cents per litre."
Compounding the relief from lower oil prices is the steady appreciation of the rand.
The rand firmed by 2.8% to R16.34 against the US dollar while trading 2.0% stronger to R19.09 against the euro and R21.97 against the British pound, as investors cheered the fragile truce.
Mitchell said that as a net importer of fuel, South Africa benefits doubly when the rand strengthens against the greenback.
"The currency’s current stance provides an additional 58 cents per litre cushion of downward pressure on the under-recovery. When paired with the oil price drop, we are seeing a total daily swing of R2.71 in relief," Mitchell added.
He said that while these daily snapshots are overwhelmingly positive, a degree of conservative caution is required. He said the real test remains the General Fuel Levy, which currently accounts for about 43% of the petrol price in South Africa.
"The temporary R3 reduction implemented by the Treasury is still scheduled to expire on May 6. Even with the global reprieve, the reinstatement of this tax remains a significant hurdle for inflation management," Mitchell said.
"The $17 drop in oil and a stronger rand have effectively “lowered the ceiling” on inflation, offering a vital window for businesses to protect profit margins and for consumers to find their footing. If these trends hold, the projected inflationary shock of May could be significantly shallower than initially feared, clearing a path for long-term wealth creation."
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