The latest escalation of the conflict between the US, Israel and Iran has opened a new geopolitical Pandora’s box — one with implications that extend far beyond the Middle East. The real impact lies less in the initial exchange but in what follows.
According to The Economist, three variables will shape that trajectory: whether the conflict remains contained, whether Iran closes the Strait of Hormuz and what Washington ultimately seeks to achieve. Together, these factors will determine whether this is another short-lived flare-up or something that requires a fundamental repricing of global risk. If the latter, South Africa will have to prepare its diplomatic and economic toolkit for a more volatile external environment — and respond with agility as conditions shift.
The first question is whether the war spreads. Iran’s unprecedented direct strikes on Gulf Co-operation Council countries in retaliation for the US/Israeli attacks mark a departure from its previous approach and represent a clear act of provocation.
For the Gulf states — especially the United Arab Emirates (UAE), Qatar and Oman — this is deeply unsettling, especially given their mediation efforts and refusal to allow US attacks on Tehran from their airspaces. Many have spent decades crafting reputations as anchors of stability in a turbulent region.
Their economic and political models depend on predictability and safety. A direct attack threatens that positioning. These states now face a difficult calculation. A forceful response risks drawing them into a prolonged conflict that could undermine their stability premium; a muted response risks appearing vulnerable.
Risk aversion is already rising, even as markets hope cooler heads prevail. Financial markets in the UAE were closed and are due to open today [March 3] and oil prices are already trending upward. Investors will be looking for signs that any escalation can be contained in the coming days, with particular attention on crude oil cartel Opec’s response and whether it does enough to steady sentiment. Yet the region remains crowded with actors capable of miscalculation and the weekend’s events have underscored how quickly longstanding assumptions can unravel.
The second ― and arguably most consequential ― variable is the Strait of Hormuz. More than a fifth of the world’s traded oil moves through this narrow maritime chokepoint, making the central risk less about production capacity and more about access. Any assessment must place Hormuz within the broader network of vulnerable sea lanes. The Red Sea is already a source of concern given the Houthis in Yemen’s ties to Iran and their long-range strike capabilities, and the Arabian Sea faces similar exposure.
In response to escalating tensions — including US and Israeli strikes on Iran and the closure of Hormuz — major shipping companies such as Maersk have begun rerouting vessels around Africa, bypassing both the Suez Canal and the Bab el-Mandeb Strait.
Iran does not need to close the strait entirely or for long to unsettle global markets. Limited harassment of shipping, drone activity or isolated incidents would be enough to raise insurance premiums, slow tanker movements and inject uncertainty into energy markets.
The Ukraine war and the Red Sea disruptions have demonstrated how quickly freight and energy prices can react to perceived threats. If Hormuz were materially compromised for a sustained period, oil prices would rise sharply. Sustained levels above $100 per barrel would amount to a global macroeconomic shock.
The third variable is Washington’s endgame, alongside Israel’s determination to eliminate what it sees as an existential threat. Some in Washington may view regime change as the ultimate objective, but Iraq, Afghanistan and Libya illustrate how initial military victories can evolve into long-term strategic burdens.
Unlike the 2025 “Twelve Day War”, which was marked by symbolic retaliation, this confrontation is substantive. Both sides have crossed thresholds they had previously avoided. And without a credible diplomatic off-ramp the risk of miscalculation rises sharply. Markets tend to react quickly when the range of possible outcomes widens.
So where does this leave South Africa? The country trades as a proxy for emerging market risk sentiment. When global investors derisk they often sell emerging markets indiscriminately. The rand weakens, bond yields rise and equity inflows stall. Over the past year reform momentum, ratings upgrades, fiscal consolidation and political continuity under the government of national unity have reassured investors. A sharp deterioration in global risk appetite could easily reverse these gains.
The most direct transmission mechanism is oil. South Africa is a net importer of petroleum products and higher crude prices feed quickly into domestic fuel costs. Fuel inflation cascades through transport, logistics and food prices. A sustained oil shock would complicate the Reserve Bank’s policy stance. Imported inflation ― especially if accompanied by rand weakness — could compromise the interest rate easing cycle and squeeze households.
A related vulnerability lies in the US monetary policy cycle. If higher oil prices push up US inflation expectations, the Federal Reserve may keep interest rates higher for longer. A stronger dollar and tighter global financial conditions tend to weigh disproportionately on emerging markets and South Africa is no exception.
Mpho Molopyane of Alexander Forbes warns that a prolonged risk-off environment could spike domestic bond yields, erasing recent gains and undermining the Treasury’s fiscal consolidation just as debt stabilisation seemed more credible.
The geopolitical dimension adds another layer of complexity. Iran’s membership of the Brics+ bloc and South Africa’s participation in joint engagements with Tehran place Pretoria under heightened scrutiny. South Africa has long framed its foreign policy around multilateralism, nonalignment and a rules-based order. Yet in a world increasingly shaped by raw power rather than formal institutions, this crisis highlights how often major powers act outside multilateral frameworks when core interests are at stake.
Menzi Ndhlovu, senior analyst at Signal Risk, argues that Pretoria must avoid predictable ideological positioning and instead calibrate its diplomacy carefully. Message discipline across the government will be essential to avoid raising the geopolitical risk premium at a sensitive moment.
The Institute for Security Studies’ Priyal Singh believes the country must heed the lessons from the recent naval exercise controversy and the remarks of the South African National Defence Force chief in Tehran in 2025. “We cannot allow incoherence between the office of the president, department of international relations [and co-operation], department of defence and others to jeopardise our bilateral relations with key external actors, our growth prospects and our longer-term development agenda.”
The crisis also presents a subtle stress test for Brics+, including the UAE and Iran. If member states prioritise bilateral stability with Washington over bloc solidarity it will reinforce the perception that Brics+ is an economic co-ordination platform rather than a cohesive geopolitical counterweight.
However, not all consequences are negative. Geopolitical uncertainty typically supports gold prices, which would benefit South Africa’s mining sector and export earnings. And if Middle Eastern shipping routes become persistently riskier, the Cape of Good Hope could regain strategic relevance as an alternative maritime corridor. But this opportunity is conditional: without efficient ports, rail and logistics reform, South Africa will be unable to fully capitalise on it.
If the conflict remains contained and shipping through the Strait of Hormuz continues, South Africa will face volatility but not structural damage. If the strait is disrupted or the confrontation widens, the consequences will intensify quickly: higher inflation, renewed pressure on the rand, tighter financial conditions and slower growth.
This is why South Africa cannot afford a passive posture. The country needs to prime its policy toolkit for a more uncertain global backdrop. That means strengthening buffers, maintaining policy credibility and ensuring foreign policy positioning does not inadvertently close doors at a moment when flexibility is essential.
• Gopaldas is a director at Signal Risk and visiting fellow at the London School of Economics.
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