The United States’ surprise decision to bomb nuclear enrichment facilities in Iran over the weekend has dramatically escalated tensions in the Middle East, triggering global market turmoil and raising alarm over a potential surge in oil prices and inflation.
US President Donald Trump announced on Saturday, 21 June 2025, that the bombing operation had “completely and totally obliterated” Iran’s key nuclear infrastructure. This marks the first direct military intervention by the US in the ongoing Israel-Iran war, representing a significant turning point in the regional conflict.
The White House justified the strike by citing the need to prevent Iran from obtaining nuclear weapons, warning Tehran that additional attacks could follow unless it agrees to “make peace.”
The ripple effects of this military escalation are already being felt across financial markets. Nigel Green, CEO of deVere Group, one of the world’s largest financial advisory firms, said the strike was a “market-defining moment” that shattered investor expectations around falling interest rates, lower inflation, and stable oil prices.
“As markets reopen, investors are bracing for sharp volatility, with crude oil prices expected to surge and inflation forecasts now under intense scrutiny,” Green said. “A conflict that had remained largely contained is now threatening to trigger broad-based repricing across the global economy.”
Analysts are now warning that Brent crude oil prices could jump to over $130 per barrel in the coming weeks. The concern is not only about the physical destruction of Iranian facilities but also about a potential closure of the Strait of Hormuz — a key global oil chokepoint through which about 20% of the world’s oil supply passes.
Green added, “Any closure or threat to the Strait of Hormuz would send prices sharply higher. Such a price shock would filter through to global inflation, which remains elevated and/or sticky in many regions.”
Local Impact in South Africa
South Africa, like many energy-importing countries, is expected to feel the impact almost immediately. While motorists have enjoyed four consecutive months of fuel price cuts, driven by a ~15% drop in global oil prices, that trend is about to reverse.
The Central Energy Fund (CEF) had already forecast a 40-cent per litre petrol price increase in July, even before the US strike. If Brent crude approaches $130, fuel prices in South Africa could spike significantly, affecting everything from transportation to food prices.
The implications go beyond the petrol pump. A sharp rise in fuel costs will likely reignite inflation, which had recently eased into the South African Reserve Bank’s 3–6% target range.
Higher inflation could derail interest rate cuts that markets had been pricing in for later this year. “If inflation spikes back up, monetary policymakers will be forced to hold, and possibly even reconsider the easing cycle altogether,” said Green.
This could significantly impact equity markets, interest-sensitive sectors, and consumer-driven businesses.
Equity and Currency Markets React
On the Johannesburg Stock Exchange and other global markets, travel and tourism companies, which are heavily exposed to energy costs and global instability, are expected to face immediate pressure. Tech stocks, particularly high-growth firms trading on elevated valuations, could also see selling as bond yields react to a shift in rate expectations.
Investors are likely to flee to safe-haven assets such as gold, which has already been rallying amid geopolitical instability. Gold is expected to rise further as risk-averse investors look for stability.
In the currency markets, the South African rand could weaken in the short term against the US dollar, as markets shift toward the dollar as a temporary safe haven. However, the longer-term trajectory is less clear.
“Currency markets could see a short-term bid for the US dollar on safety grounds, but the longer-term picture is more uncertain,” Green explained. “If oil drives up inflation and suppresses consumer demand, we may see slower growth in the US and renewed pressure on fiscal stability. That’s not necessarily a supportive environment for the dollar.”
This complexity may create volatility in emerging market currencies like the rand. While initial shocks may weaken the rand, dollar weakness tied to longer-term US economic concerns could provide support for the local unit later in the year.
What Comes Next?
The world now waits to see how Iran will respond. Any retaliatory strikes or disruption of oil flows could intensify market reactions. Additionally, geopolitical developments will heavily influence central banks, particularly those in emerging markets like South Africa, which are already battling slow growth, high debt levels, and unemployment.
As the situation develops, economists and investors are urging both caution and preparation for a new phase of volatility.
