The JSE’s all share index was severely buffeted on Thursday, shedding more than 4% in value — one of the steepest daily declines in the recent past — as the war in the Middle East continues to sap investor confidence locally and abroad.
The index shed more than 4,700 points shortly after the market opened and it was trading at 109,945 points in mid-afternoon trade, with resource stocks, and precious metals in particilar, bearing the brunt of the sell-off.
Gold, a traditional safe haven in times of uncertainty, fell for a seventh straight day, taking its losses over the past week to about 10%. This has come as a rude awakening for gold mining firms, which were enjoying a record bull run until the first missiles dropped on Iran last month, sparking a regional war.
The conflict began on February 28, when the US and Israel launched airstrikes on multiple sites and cities across Iran, killing the country’s supreme leader.
Sibanye-Stillwater fell the most in about two weeks and was down more than 13.5% to R44.73 at 2;20pm. Impala Platinum was also 13.5% weaker, while Gold Fields shed almost 10% of its market value.
Valterra Platinum, AngloGold Ashanti, Harmony, and Pan African Resources were down by between 7% and 10%, dragging the resources index 9.8% lower.
The JSE’s top 40 index was down 4.48%.
The all share has dropped from 129,000 points before the Middle East war, a loss of more than 20,000 points and equal to more than R2-trillion in value.
Escalating conflict
The conflict showed no signs of abating on Thursday, with several Gulf states reporting Iranian attacks on energy sites after Israel struck Iran’s South Pars gas field — the world’s largest natural gas reserve.
Adding to concerns was a Reuters report that the US is considering military reinforcements to bolster its war efforts in the region.
Petrochemical group Sasol has emerged as one of the few local beneficiaries from the war, with its stock up about 30% in the past week and more than 97% since the beginning of the year.
The JSE-listed group has benefited from the surge in oil prices over the past two weeks, which rose to as high as $119/bbl on Thursday. The last time oil was at these levels was in June 2022 amid the Covid-19 pandemic and about four months into Russia’s invasion of Ukraine.
Sasol generates significant revenue in hard currency its global chemical and energy operations, whose products are primarily priced in dollars. The effect is that a weaker rand boosts the group’s rand-denominated earnings, while a stronger rand can lower earnings despite strong sales volumes.
The rand has weakened significantly since the start of the Iran war, with the local currency earlier depreciating to R17/$. This week was the first time this year that it has traded at these levels.
Last week professional services firm EY-Parthenon warnmed that the rand could weaken to as much as R17.63/$ this year if the conflict between the US, Israel, and Iran continues for six months or more.
The surge in the price of oil and weakening rand has all but closed the door on further interest rate cuts, and rate increases are now on the cards later on in the year.
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