Rand Weakens As Oil Prices Rise And U.S–Iran Tensions Escalate

The South African rand weakened in early trade on Monday, dragged down by a spike in global oil prices and increased geopolitical tension following U.S. military action against Iran over the weekend. By 06:59 GMT, the rand was trading at 18.08 to the dollar, marking a decline of roughly 0.4% from Friday’s close.

The dollar edged higher against a basket of currencies as investors sought safe-haven assets, while oil prices rose by about 1.4%. Market sentiment remains cautious as investors await Iran’s response, amid growing concerns that retaliation could disrupt global oil supply. Analysts fear that a closure of the Strait of Hormuz, a crucial route for about 20% of the world’s crude oil, could further push up prices and weigh on emerging market currencies.

According to Andre Cilliers, Currency Strategist at TreasuryONE, market activity is expected to be largely shaped by global developments in the short term. “Market moves will be driven by geopolitical events,” he said. “Prices are likely to remain fairly volatile in the short term as traders await Iran’s response to the U.S. attacks.”

Locally, attention will turn to economic data scheduled for release later in the week, including the leading business indicator on Tuesday and producer inflation figures on Thursday. These reports will help investors assess the state of South Africa’s economy, which continues to face structural challenges.

South Africa’s benchmark 2035 government bond also saw weakness in early deals, with the yield rising by 2.5 basis points to 10.075%, reflecting increased caution among investors in response to the global uncertainty.