After a week of strong recovery, South African markets face renewed uncertainty due to tensions in the Strait of Hormuz, impacting oil prices and economic stability.
Image: Ander Gillenea / AFP
After a week of strong recovery on global and domestic markets, market sentiment turned sour last week after renewed attacks by Iran and the US on military and other targets, especially in the Strait of Hormuz.
Brent crude jumped rapidly as transit traffic slowed or halted.
Natural gas costs surged sharply due to targeted strikes on regional production and export facilities.
The blockaded Gulf shipments constrained essential agricultural inputs, squeezing global food supplies.
Equity and bond markets were hit hard during the middle of the week as higher fuel and freight expenses are expected to pass through to consumer goods, forcing central banks to adopt hawkish monetary stances.
These inflationary and higher interest rate fears gave way to investors rotating out of riskier equities into safe haven assets like gold and platinum, leading to widening bond yields across advanced economies. Uncertainty prevails over whether the Strait of Hormuz will be opened again.
The renewed uncertainty surrounding the Iran US peace talks and ceasefire prospects pushed equity prices sharply lower during the first part of last week, but some ground was recovered later in the week as oil prices started to move downwards again.
The price of Brent crude rose quickly from $72 per barrel on Monday to $79 per barrel on Wednesday.
Signs of ongoing negotiations to reopen the Strait of Hormuz pushed Brent oil lower to $75 per barrel on Friday afternoon. In response, equity prices recovered over the last two days, and most indices ended the week flat.
After losing 2.3% by last Wednesday, the Nikkei in Japan recovered to end the week only 0.5% lower. The same trend was seen in Germany, where the DAX recovered almost 2.0% from last Wednesday after losing 3.1% during the first half of the week.
In the UK, the FTSE 100 ended the week 1.1% lower, recovering from a 3.3% loss during the first three days. In the US, the S&P 500 remained bullish and ended last week 1.23% higher.
The Dow Jones Industrial Average traded sideways, losing 0.5%, while the NASDAQ gained 1.74%. The MSCI World Index, after losing 1.1% on Tuesday and Wednesday, recovered strongly on Thursday (0.83%) and Friday (0.34%) to end the week 0.5% higher.
On the JSE, equity prices also lost ground up to last Wednesday. The ALSI gave up 2.7% initially but recovered to end the week only 1.0% lower.
The big losers last week were the precious metals and mining index, which lost 6.0% as precious metal prices, such as gold and platinum, came under pressure. This led to the Resources 20 Index trading down by 4.8%, putting the ALSI under pressure. Financials gained 0.3% and Industrials also gained 0.3%.
Despite the uncertain and volatile movement in Brent oil prices, which rose by as much as $3 per barrel last week, the steady exchange rate contributed to the ongoing recovery in petrol and diesel prices since the last fuel prices were set.
The petrol price was over recovered by R1.62 per litre for 95 ULP last Thursday, while the diesel price was over recovered by R1.29 per litre. Fuel prices for September will be determined by average prices from 26 June to 30 July. It is still expected that fuel prices may decrease by more than the current recovery.
The rand exchange rate remained steady against most currencies.
Against the US dollar, the rand dropped by only 6 cents last week to close on Friday at R16.29/$. Against the pound, the currency lost 23 cents over the week to close on Friday at R21.86/£ and depreciated against the euro by a mere 7 cents to R18.64/€.
This coming week, the domestic financial markets await the release of South Africa's mining production data for May 2026 on Tuesday.
In global markets, apart from monitoring developments surrounding the current US Iran peace treaty, investors will await the release of the US Consumer Price Index (inflation rate) on Tuesday, the Producer Price Index (PPI) on Wednesday, and retail sales data for June 2026 on Thursday, as well as various housing sales figures.
If both the US core inflation rate and headline inflation rate decline in June, markets will react positively on expectations that the US Federal Reserve will not increase interest rates.
Elsewhere, the Bank of Canada (BoC) will announce its interest rate decision on Wednesday, while China will release its GDP growth rate for the second quarter of 2026, also on Wednesday.
Chris Harmse is the consulting economist of Sequoia Investment Solutions and a senior lecturer at Stadio Higher Education.
Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
Image: Supplied
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