The sudden attack of the US on Iran nuclear facilities last week and the almost day-to-day attacks on each other between Israel and Iran, has let to a sudden strong increase in oil prices. Since the beginning of the Israel-Iran war on June 13, 2025, the brent oil price increased from $70 (R1 251) per barrel to $77 per barrel on June 20.
During the same time, the exchange rate of the Rand depreciated by 30 cents from R17.77 against the dollar to R18.07/$. Although both the oil price as the value of the Rand recovered till Friday to R17.78/$ and $66.47/$, the under recovery in South Africa’s fuel prices could not be avoided.
Last Wednesday the price for 95 Petrol was still 52c per liter under-recovered and that for diesel 83c per liter. Although both factors improved strongly last Thursday and Friday it will be a question of being too little too late, and consumers are likely to face a steep increase in fuel prices this coming week.
One must just keep perspective on these values. The public may immediately think that South African inflation rate is bound to increase rapidly and that it may force the Monetary Policy Committee (MPC) of the Reserve Bank to turn around and increase interest rates soon.
However, the inflation rate is calculated by comparing the annual increase. If the petrol price does increase by 50c per liter on Wednesday, the motorist will then pay R21.85 per liter more in Gauteng. This is, however, still R1.41 less than the price on July 4, 2024 (R23.26 per liter). This will also contribute to the inflation rate decreasing further. Given the recovery in the Rand and the oil price changes become good that in months to come fuel prices will start to move lower.
JSE remains bullish, S&P500 on a new record level
Equities on the JSE seem to continue to perform well despite geo-political issues globally (wars and Trump tariffs) and locally (the firing of deputy minister Andrew Whitfield from the position of Deputy Minister of Trade, Industry.
The All Share index, although trading down by only -0.1% on Friday, closed 0.8% in the green over the week. The index is now 14.0% higher than at the beginning of the year, gaining 7.0% in quarter two despite all the geo-political issues. Even financial shares, as proxy for the domestic market and economic effects, rose 3.0% last week and are now 12.1% higher for the last year.
On Wall Street in the US, despite the mixed reaction after the US air force bombed Iranian nuclear facilities, shares reached record high levels. The news last week that the US economy with the final estimate grew slower at an annualised rate of -0.5% in quarter one 2025, than the decline of the second estimate of -0.2% drop and the first quarterly contraction in three years, seems not to affect equity prices.
US consumer spending in May was also lower than expectations as it fell in May as the boost from the pre-emptive buying of goods like motor vehicles ahead of the Trump administration’s tariffs faded, while monthly inflation maintained a moderate pace of increase.
The S&P 500 index advanced by 0.52% on Friday, gaining 3.2% over the week.
Prospects for this coming week
Investors will await the release of the US non-farm payrolls data this coming Friday. It remains one of the major gauges for the US Federal Reserve in terms of its interest rate stance. It is expected that the US economy will add 129 000 new jobs during June given that its unemployment rate will remain at 4.2%, the fourth consecutive month in a row. The economy is currently in a stable state and given the weak economic growth numbers published last week, it may indicate to the Fed that lowering its bank rate may be the correct thing to do. Especially if no further tariff surprises are on the cards.
Domestically, the saga around the vulnerability of the Governement of National Unity will dominate the Rand exchange rate and equities this coming week. Of interest is the announcement of the National Government’s Budget balance today. It is expected that the deficit on the primary budget had shrunk from R64 billion in April to only -R18 billion in May and heading towards a surplus as was announced in the National Budget. The new motor vehicle sales for June will be published on Tuesday.
Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
*** The views expressed here do not necessarily represent those of Independent Media or .
BUSINESS REPORT
