South African consumers to face financial strain amidst Israel-Iran conflict

24 June 2025 | Economic factors

The escalating conflict between Israel and Iran is sending ripples through global markets, raising concerns over potential economic repercussions especially closer to home in South Africa and the impact on consumers in the country.

Frank Blackmore, the Lead Economist at KPMG, said that the overall impact will hinge on two pivotal factors: the scale and duration of the conflict.

Since the onset of the conflict, oil prices have already begun to rise, and Blackmore stressed the significance of this surge.

“An increase in oil prices traditionally translates to higher costs for transportation and goods, which the consumer ultimately endures,” he said.

In South Africa, where the economy relies heavily on oil imports, subsequent price increases could put further strain on inflation rates, potentially leading the South African Reserve Bank (Sarb) to maintain elevated interest rates for an extended period.

Blackmore further said, "If the conflict intensifies beyond what we are currently witnessing, the impact will be far more significant. If it is resolved swiftly, the effects on the markets will likely be limited. There are two avenues through which the impact will be felt. Firstly through the oil price. We have already seen an increase since the onset of the conflict. Secondly, through the exchange rate. The Rand has depreciated due to heightened uncertainty, which could lead to inflationary pressure on the local economy and the possibility of interest rates remaining higher for longer. Given that both oil and the exchange rate affect the impact of the cost of transporting people and goods around the economy, the inflationary impact will be shifted down onto the consumer in the form of higher inflation. The Reserve Bank may be forced to maintain elevated interest rates for an extended period."

the risks to global energy markets were growing, adding that even the threat of closure or interference would “likely push oil well beyond $100 per barrel, reigniting inflation and altering the current trajectory of interest rate policy in developed economies.”

“Investors are clinging to a framework shaped by central bank support, solid earnings, and disinflation. But if energy prices rise sharply from here, that disinflation story evaporates. Rate cuts could stall. Market momentum could reverse,” Green said.