Rising oil prices spell hardship

SA consumers brace for financial pressure from global cost of escalating Israeli-Iranian hostilities

- SIPHELELE DLUDLA

AS THE conflict between Israel and Iran intensifies thousands of kilometres away, South African consumers are bracing for increased financial pressure stemming from a surge in global oil prices.

With the Israeli bombardment of Iranian military targets escalating hostilities, the ripple effects of this geopolitical strife are expected to dampen household budgets, leading to higher inflation and rising costs of living.

The war erupted more than a week ago as Israeli airstrikes targeted Iranian military infrastructure, including pivotal oil and gas facilities such as the South Pars gas field and the Shahr Rey oil refinery, provoking retaliatory missile attacks by Iran on major Israeli cities.

This has raised alarm bells among market watchers, particularly given Iran's critical role as the third-largest oil producer within the Organisation of the Petroleum Exporting Countries (Opec+), contributing around four million barrels of crude oil a day and controlling access to the vital Strait of Hormuz.

The Strait of Hormuz is a crucial maritime chokepoint through which approximately 18-19 million barrels a day or 20% of global oil shipments pass, making any potential disruption a considerable concern for worldwide oil supply.

Despite Iran maintaining crude exports at 2.2 million barrels a day amid the conflict, rising shipping costs and delays due to the potential blockade of this strategic waterway could influence inflation across the globe.

Yesterday, Nolan Wapenaar, the co-chief investment officer at Anchor Capital, said the blockade of the Strait of Hormuz would have far-reaching consequences for South Africa's economy.

Wapenaar said this would be a major blockage in the supply of oil to the rest of the globe.