Despite hopes that the United States and Iran are moving towards an end to their conflict, South African consumers remain under severe strain.<\/p>\n\n\n\n
The United States and Israel launched attacks on Iran in late February, with the Persian nation then responding by closing off the region’s oil supply, specifically the Strait of Hormuz.<\/p>\n\n\n\n
The war led to oil prices and, in turn, petrol prices in South Africa to skyrocket. Inflation then reached 4.0% in April and 4.5% in May.<\/p>\n\n\n\n
This caused the South African Reserve Bank (SARB) to hike rates by 25 basis points in May, increasing the repo rate to 7.0%.<\/p>\n\n\n\n
The new 60-day peace deal between the United States and Iran has brought relief to many in the global economy, but economist Elize Kruger said that signs of pressure are still likely.<\/p>\n\n\n\n
“While the signing of a peace framework between the United States and Iran in June has helped ease some global tensions, uncertainty continues to weigh on business and consumer confidence,” said Kruger.<\/p>\n\n\n\n
Although oil prices have started to ease to around US$72\/bbl, daily over-recoveries at the pump have narrowed to below R1\/litre for both petrol and diesel. <\/p>\n\n\n\n
“This suggests that any fuel price reduction in early August may be limited, unless the rand strengthens further or oil prices decline more meaningfully during the month,” said Kruger.<\/p>\n\n\n\n
“Together with weaker confidence, these pressures are likely to weigh on economic activity in the months ahead.”<\/p>\n\n\n\n
If fuel prices remain high, heightened inflation will also limit the SARB’s ability to cut or keep rates on hold.<\/p>\n\n\n\n
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