Rising tensions in the Middle East are putting markets in a risk-off mode – and that spells bad news for the rand, interest rate cuts, and petrol prices in South Africa.
Markets are facing several shocks from escalating tensions in the Middle East. Economists at the Bureau for Economic Research warn that these global geopolitical risks will likely spill over into local markets.
Israel launched a strike on Iran, according to two US officials, but the Islamic Republic’s semi-official Tasnim news agency denied the reports, and said the Isfahan nuclear facility was safe. The International Atomic Energy Agency confirmed there was no damage at nuclear sites. “We continue to highlight the heightened risk that this war will move up the escalation ladder,” RBC Capital Markets LLC analysts including Helima Croft said in a note before crude’s spike. “Oil supplies could be caught in the cross-hairs of this metastasizing conflict.”According to the BER, Israel’s retaliatory strike was largely expected, so the impact on oil was not as big as it could have been. In fact, by mid-morning, Brent crude was again below the $90 a barrel mark, sitting at $88.
The theme of ‘higher for longer’ interest rates has spread in the global and local narrative, but the BER said this is more concentrated in the US than in Europe, where indications are that rate cuts are around the corner.
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