Despite a volatile session that ended in positive territory, the JSE remains on track for its worst month since the 2008 financial crisis as the Iran war drives inflation fears and a sell-off in mining and banking stocks.
After initially rising to as much as $114 a barrel on Monday, up 55% since the first US-Israeli strikes on February 28, the price plummeted after US President Donald Trump said his administration has delayed his ultimatum to target Iran’s energy infrastructure following “talks” with an unnamed “leader” in Iran who is “not” Supreme Leader Mojtaba Khamenei.
Following his two-day ultimatum to Iran to open the Strait of Hormuz, Trump has extended that to five days, provided further talks yield progress. Iran has not confirmed any talks with the US at this stage.
The war continues to pose a threat to the 20% of global supply that usually passes through the Strait, which is now effectively blocked by Iran.
As oil prices have roiled the local stock exchange, the all-share index has plunged almost 14% this month, its biggest drop since October 2008, surpassing the 12.83% fall in March 2020 at the onset of Covid-19 lockdowns.
Leading the losses are precious metals and mining stocks, which have shed more than 29% so far in March, with the gold price down 13% and platinum not far behind.
The plunge on the JSE has wiped out more than a combined R507bn in market value across the JSE’s three largest gold miners — AngloGold Ashanti, Gold Fields and Harmony Gold — and a further total R272bn from Sibanye-Stillwater and platinum group metal miners Valterra and Impala.
The JSE Top 40 — 35% of which consists of mining companies — has lost almost 15% over the period.
Main culprit
Due to the weaker rand, South Africa’s financial sector has also shed hundreds of billions in value in recent weeks.
The main culprit behind the bloodbath is inflation, with rising oil prices fuelling fears that monetary policymakers will hike rates in the coming months.
Economists now expect inflation to jump from 3.2% in March to 4.5% in April as fuel stations implement their biggest monthly petrol and diesel price hikes yet.
The sudden shift in the interest rate outlook has sparked the sell-off in precious metals, which are less attractive than bonds amid high interest rates. Already in March, gold and platinum have suffered as investors flock to the dollar as a haven.
In his post on Truth Social on Monday morning (US time), Trump said the US and Iran held “very good and productive conversations” over the previous two days.
He said both countries are now seeking a “complete and total” resolution of the conflict in the Middle East.
He did, however, caution that if further talks do not yield suitable results, the US stands ready to target additional sites in Iran to get the Strait open.
The weekend spat saw gold plunge initially as much as 13% on Monday before recovering to be just 2.5% lower at $4,375 an ounce by 7pm.
The rand, in turn, opened the week at a three-month low of R17.18 a dollar. It has taken a more than 5% hit since the start of the war, due to falling commodity prices and a firmer greenback. It recovered after Trump’s morning announcement however, to be 1.26% firmer at R16.81 a dollar by the evening.
The South African Chamber of Commerce and Industry (Sacci), which tracks consumer and business confidence in the country, has called for an immediate ceasefire in Iran, warning that the war will significantly hurt global growth.
In a statement on Monday, it said financial market instability caused by the war will have a “significant impact on the global economy, with the resultant negative effects on the business cycle and a clear deterioration in inflation, interest rates, economic growth, exchange rates and commodity prices”.
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