Prolonged Middle East war going to drive up inflation: Analyst – SABC News

Oil prices surged by 30% on Monday morning over renewed fears of a supply shortage from the Middle East as the US-Israeli war against Iran enters a second week.
The price of crude oil elevated to its highest level since Russia’s invasion of Iran in 2022.
While the price of brent crude has settled to trading at around 104-dollar-per barrel, oil prices had jumped up to nearly 120-dollars per barrel in early morning trade.
High oil prices are expected to remain elevated amid fears of a prolonged disruptions and blockade at the Strait of Hormuz, a shipping route for 20% of global oil supply.
Analysts have emphasised that the jump in the oil price combined with the weaker rand against the US dollar, has pushed up the Central Energy Fund’s fuel price estimates once again as the war in the Middle East intensifies.
The Finance Ministers of the Group of Seven (G7) nations held an emergency meeting to discuss a possible joint release of petroleum from reserves coordinated by the International Energy Agency. The joint release may include 200 to 300 million barrels of emergency oil reserves.
Chief Economist at Investec Annabel Bishop says there will be an impact on fuel prices.
“Rising oil prices and rand weakness is expected to lead to higher inflation in SA, therefore the longer oil prices are elevated and the rand weak will be determining factor for how high inflation rises in South Africa and for how long, also key as well are interest rates. Higher inflation, particularly about 4% is expected to result in interest rate hikes if this is prolonged, but however if there’s a short sharp interest shock, sharp oil shock which is what we’ve seen to date, the Reserve Bank may look through this and not decide to hike interest rates.”
VIDEO | Fuel prices are expected to rise in SA:

Chief Economist at the Agricultural Business Chamber of South Africa Wandile Sihlobo says the conflict in the Middle East is also expected to have an adverse impact on grain farmers due to limited fertilizer which is largely imported from the Middle East.
“The last time we had a significant disruption in the fertilizer market is when we experienced the start of the Russia, Ukraine war and I think we are back now at those levels where it seems there may be a major disruption in the global fertilizer market.  South Africa is a major exporter for fertilizer from a country perspective because if you look at the share of imports and annual fertilizer requirements, we import about 80% of the fertilizer that we use a year.  A year we use fertilizer that is over 2 million tons and of course the grain, oil seed and sugarcane are among those users of fertilizer.”
The Motor Industry Staff Association has expressed deep concern about the possibility of another fuel price increase because of the Middle East conflict.
In a statement the union said the higher fuel costs are always passed directly onto consumers and workers, driving up the overall cost of living.
VIDEO| Analysts are concerned about the impact of the conflict on inflation:

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