The JSE all share index posted its steepest climb in more than six years on Wednesday as markets breathed a sigh of relief in the wake of the US and Iran’s last-minute two-week ceasefire.
As the dust settled after six weeks of war, local investors joined their international peers in a relief rally that buoyed the rand and sent capital flooding back into banking, mining and property stocks, all of which had been battered by fears of a resurgence in inflation and rate hikes.
“If these trends hold, the projected inflationary shock of May could be significantly shallower than initially feared,” said Aluma Capital economist Frederick Mitchell.
“This combined correction [of easing fuel costs and inflation] offers a critical window for economic stability, improved consumer confidence and renewed growth momentum.”
The ceasefire announcement, which came less than two hours before US President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz, has buoyed hopes for lasting peace, with oil prices plunging by more than $10/barrel overnight before falling by a further $4 during the day.
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However, an end to the war is far from promised. Momentum Investments chief economist Sanisha Packirisamy warned in a note that “the ceasefire is fragile and heavily contingent on the upcoming talks”.
Peace talks are based on Iran’s 10-point plan, which reportedly includes a US withdrawal from regional bases, allowing Iran to control the Strait while charging fees to escort ships through it, and compensation for damages.
“It is questionable that the US administration will accept all of these terms,” said Packirisamy.
Even if it does, “it is unclear who within Iran has the authority to negotiate and enforce a deal, particularly after the decapitation of much of its senior leadership”.
“Additionally, the damage to energy infrastructure, such as liquefied natural gas terminals in Qatar, will take years to repair, contributing to continued economic disruption.”
Trump’s second term has seen the president repeatedly switching his stance on major foreign policy issues, from the rollout of universal tariffs to the annexation of Greenland. His public comments about America’s progress in achieving its aims in Iran have been equally erratic.
Additionally, the damage to energy infrastructure, such as liquefied natural gas terminals in Qatar, will take years to repair, contributing to continued economic disruption.
— Sanisha Packirisamy, Momentum Investments chief economist
The details of the deal also point to a rift between the US and Israel, which said on Wednesday that the agreement will not include pulling its troops out of Lebanon.
Still, local and international stock markets cheered the first real sign of an end to the war that has upended the global economy and caused the biggest oil spike in years.
The rand gained more than 2.7% on Wednesday, its best day since November 2023, echoing a global trend as the dollar weakened more than 1% against the euro.
At its strongest, the local currency reached R16.26/$, about the level reached on March 10 when Trump told an evening press conference that the war would end “pretty soon”.
The weaker greenback also saw gold edge up more than 1%, regaining some ground lost during the flight to US bonds in March.
The all share index, backed by a stronger rand and precious metal prices, ended the session up 3.96%, its best day since the Covid-driven chaos of March 24 2020 when it rose more than 7% on stimulus measures announced by the world’s largest economies.
Driving the rally was a buying spree in banking and mining stocks, both of which have been hurt by fears that the Iran war would keep oil prices elevated, fuelling inflation and forcing central banks to hold off on interest rate cuts.
A turnaround in this outlook saw the JSE banking index climb more than 6% during intraday trading, the biggest single day of buying since June 2024, offsetting most of its losses since the start of the war.
Standard Bank, South Africa’s largest listed bank, jumped more than 7% to a record R336.76 a share. Absa, Capitec, FirstRand and Investec all rose more than 5%.
By the close of trading, the banking index was up 4.93%.
Renewed rate cut expectations also saw property stocks jump, with the South African property index up more than 5%.
Inflation risks
The precious metals & mining index rallied by as much as 9% as markets braced for a flock to commodities in anticipation of rate cuts, which make bonds less attractive. It ended the day up about 6%.
Leading the gains were platinum group metal miners Impala, Valterra, Northam and Sibanye-Stillwater.
Investec economist Lara Hodes said markets were already pricing in moderation in petroleum product prices from April.
“Our expected case remains one of a short war [ending last night], with little GDP impact, but a lag in inflation effects from higher fuel prices will feed through, as well as second-round effects, although these are not likely to be very large impacts,” she said in a note.
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