Iran conflict threatens SA economy with fuel price surge

PayInc, the company responsible for clearing payments between South Africa’s largest banks, has sounded alarm bells over a significant economic downturn in the wake of mounting Middle East conflict.

In its latest Economic Index, the group warned South Africa’s vulnerability to fuel supply leaves the country exposed to a wave of rising inflation with knock-on effects across the entire local economy in the coming months.

If physical shortages of fuel persist over an extended period, the Iran war “could trigger a worst-case economic scenario that might remind us of the Covid-19 lockdown period”, said independent economist Elize Kruger.

“Arrangements such as working from home and cancelling unnecessary travelling could be returning, a negative confidence shock that could bring the economy to its knees,” she said.

The most immediate impact will be felt at fuel stations, with the international oil price having surged more than 40% since the US and Israel began strikes on Iran on February 28, prompting the latter to halt shipping through the Strait of Hormuz and putting around a fifth of global oil supply on hold.

Kruger said the fuel price increases on April 1 “will be the highest ever to be implemented in a single month in South Africa and will likely derail the fragile economic recovery envisaged for the country in 2026”.

The country’s vulnerability to fuel supply will, in all probability, be exposed like never before. Government is indicating engagements are taking place with industry players to ensure uninterrupted fuel availability without immediately tapping into South Africa’s strategic oil reserves
— Elize Kruger, independent economist

PayInc’s latest index, which tracks the monthly value of electronic transactions cleared through its systems, pointed to an economic recovery in February, with the figure climbing 0.4% to 103.9, which is 3.5% higher than one year earlier.

However, the firm expects the Iran war to introduce significant downside risks to the outlook as conflict spreads across the Middle East, disrupting key supply chains such as in the Strait of Hormuz while increasing global uncertainty.

“The country’s vulnerability to fuel supply will, in all probability, be exposed like never before,” said Kruger.

“Government is indicating engagements are taking place with industry players to ensure uninterrupted fuel availability without immediately tapping into South Africa’s strategic oil reserves.

“However, the reality suggests industry players might be limited in what can be offered as solutions in a scenario where fuel problems are being felt in many countries.”

With Brent crude trading above $100 (R1,666) a barrel for most of March, the scale of forecast fuel price increases mean local companies are unlikely to absorb rising costs, instead passing them on to consumers.

PayInc expects inflation to climb from 3.2% in March to 4.5% in April, with this year’s average inflation set to increase to 4.4%, which is outside of the SA Reserve Bank’s 3% target range.

While an interest rate hike is not expected when the monetary policy committee meets this month, “a rate hike could come sooner than expected”, said Kruger.

“While the full impact is impossible to predict, given that no-one knows how long the war will last, it is increasingly clear even a relatively short duration could have ripple effects on global and local economic prospects in the months to come.”

PayInc’s data showed a 12.5% year on year increase in the number of transactions cleared through its systems in February, while the nominal value of electronic transactions rose to R1.33-trillion, compared to R1.25-trillion in January 2026.