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Middle East Conflict Spurs Oil Price Spike, Weakens Rand—Threatens July Fuel Price Cuts in South Africa

June 16, 2025

(3 Minutes Read)

The recent escalation of conflict in the Middle East has sent shockwaves through global oil markets and put renewed pressure on the South African rand—developments that could erase anticipated fuel price cuts for July.

According to mid-June data from the Central Energy Fund (CEF), local fuel price recoveries were still in positive territory, suggesting potential reductions at the pumps. These projections were based on a stable rand/dollar exchange rate of R17.80/$ and an international oil price of around USD 68 per barrel.

However, the situation changed dramatically following Israeli airstrikes on Iran on Thursday, 12 June. In response, oil prices surged past USD 73 per barrel, and the rand weakened beyond R18.00/USD — both unfavourable shifts for South African fuel pricing.

Before the escalation, the expected over-recoveries were minimal:

Petrol 93: -10c/litre
Petrol 95: -7c/litre
Diesel 0.05%: -13c/litre
Diesel 0.005%: -12c/litre
Illuminating paraffin: -23c/litre

With global oil prices now climbing and the rand under pressure, these potential reductions are at risk of being wiped out entirely.

Bloomberg reports that oil surged up to 13%—Brent crude reaching USD 78 per barrel, marking the steepest intraday rise since the outbreak of the Russia-Ukraine war in March 2022. The spike was driven by fears of broader conflict in a region responsible for a third of global oil production.

Israeli Prime Minister Benjamin Netanyahu confirmed the strikes were aimed at Iran’s nuclear infrastructure and military capabilities. In retaliation, Iran launched more than 100 drones, vowing a severe response to the loss of high-ranking military personnel and nuclear scientists. The resulting geopolitical uncertainty has rattled markets and fueled concerns over oil supply disruptions. This turmoil has triggered a global risk-off sentiment, prompting investors to pull out of emerging markets, such as South Africa, which further weakens the rand.

Investec chief economist Annabel Bishop noted that South Africa’s oil imports, priced in US dollars, have benefited from a relatively strong rand earlier this year. The average exchange rate between January and April improved to R19.92/$ from R20.44/$ during the same period in 2024, helping reduce import costs and support lower fuel prices.“So far in 2025, we’ve seen petrol prices drop by about R1/litre, thanks in part to the stronger rand,” Bishop explained. “But continued geopolitical instability could reverse those gains.” More optimistically, the Bureau for Economic Research (BER) observed that currency markets appeared to stabilise after the initial reaction to the Israeli strikes. This may soften the ultimate impact on local fuel price trends.

However, market sentiment remains fragile. The extent of Iran’s retaliation—and whether the conflict broadens—will heavily influence future oil prices and the rand’s performance. As the BER put it, “The scale of the response will determine much of the market reaction in the coming weeks.” South African motorists, meanwhile, will have to wait and watch, hoping geopolitical tensions ease before fuel prices are officially reviewed in early July.