With oil prices soaring to $111 per barrel due to escalating tensions in the Strait of Hormuz, South African consumers face the prospect of significant fuel price hikes. Experts warn that the ongoing conflict could lead to broader economic implications for households across the nation.
Image: Ander Gillenea / AFP
With concerns that there is no viable way to reopen the Strait of Hormuz, the international oil price climbed to $111 per barrel on Tuesday painting a gloomy picture ahead for consumers.
Saxo UK Investor Strategist, Neil Wilson said that prices are closer to where they were on the 31 March top than the middle of April’s ‘hopium’ moment.
"The backwardated forward curve indicates physical scarcity is driving prices rather than headlines over the war. Fundamental supply side tightness remains unfixed and traders are increasingly watching what's happening on the water (ie nothing) rather than trading the diplomatic stuff," Wilson said on Tuesday.
The latest proposal from Iran regarding the opening of the crucial Strait of Hormuz was met with concerns from US President Donald Trump.
As the oil price edges higher, it can only point to another fuel price increase for South Africa in May.
Neil Roets, CEO of Debt Rescue told Business Report that another increase in fuel prices should put the country on red alert.
Roets said, "Even though the expected hikes have moderated from earlier in April, the reality is that consumers are still facing a significant increase, which many households simply cannot absorb at this time."
The latest data from the Central Energy Fund showed an under recovery of R1.76 for 93 Unleaded petrol and R2.09 for 95 Unleaded.
Should current price trends persist until the end of this week, and assuming that the two grades are averaged out, South Africans should be looking at a petrol price increase of around R1.85 per litre.
The diesel situation is far more dire. Although the under-recovery is significantly smaller than it was at the beginning of April, when some were predicting an increase of R10 or more, diesel customers are still facing a diesel increase in the region of R5.40 in May.
Given the softer data that has come in this week, that could subside to around R4.95 if current trends persist.
"Oil prices have surged again amid concerns of renewed military escalation in the Middle East, including recent developments in the Strait of Hormuz. For a country like South Africa, which is heavily reliant on imported fuel, this volatility translates directly into higher costs at the pumps," Roets said.
"Asking consumers to once again “brace” for impact is simply not realistic. Most households have already run out of room to adjust their budgets. They are hanging on by a very thin thread," the Debt Rescue boss said.
"Fuel price increases, particularly in diesel, drive up the cost of transporting goods, which in turn pushes up food prices and essential household expenses. Consumers are hit on multiple fronts, and this will inevitably place upward pressure on inflation." Roets said.
"The knock-on effects are deeply concerning. For millions of South Africans, the cost of commuting, whether by private vehicle or public transport, is becoming unaffordable. Travel to and from work is becoming increasingly financially unviable, especially for lower-income households," Roets added.
Frank Blackmore, Lead Economist at KPMG South Africa, said that the conflict between the US and Iran has gone on for two months now, resulting in the energy price shock, specifically to fuel.
Blackmore said, "Other goods were also affected, such as aluminium, helium, fertilizers, and products due to the blockages in the Strait of Hormuz and therefore the shortage in supply for a lot of those goods to global markets. If this war continues for a long period of time, for nine to 12 months minimum, then we could expect second round effects, such as price increases that run through the market, and the South African Reserve Bank (Sarb) would want to prevent that, and would be pressured to increase interest rates."
The economist added that most analysts, at the beginning of 2026, forecast two further reductions in interest rates throughout 2026.
"That's possibly a 50 basis points reduction from where we are now. With the bank keeping rates constant at their previous meeting, we know that rates are therefore slightly restrictive where they are at the moment, and therefore there's no further reason to increase those rates unless the bank sees this war continuing for a longer period of time," Blackmore said.
"We've seen pre-war inflation very close to the bank's forecast of 3%, even if inflation increases to 4% and above in April and potentially in May, as long as the war in ends, reasonably soon, perhaps this month or next, we will see that inflationary spike starting to return towards the new target of the bank, as oil prices come down, fuel prices come down through the economy," Blackmore added.
Blackmore said, "Therefore, I would expect at the next meeting no further action from the bank at this point, given the uncertainty, but also the intent for everyone to put an end to this war at this point."
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