Dr Roelof Botha

Higher long-term interest rates are starting to put pressure on the fiscal affairs of several countries, with the premium of French 10-year government bond yields over safe-haven German yields rising to above 150 basis points on 2 October, the highest level in 15 years.

After a four-week reprieve from military strikes in the Middle East, the end of August witnessed another flare-up in hostilities between the US and Iran, leading to another spike in oil prices. Despite the remarkable strength of South Africa’s currency, this contributed to a further rise in domestic fuel prices in September, which is bound to stall the recent downward trend in the consumer price index (CPI).

July started on a positive note, with Brent crude oil averaging around $75 per barrel during the first ten days of the month. As has become customary since hostilities flared up at the end of February, the temporary pause in military strikes in the Middle East did not last long, with oil prices rising to $87 per barrel on 23 July.

No sooner had the price of crude oil dropped to below $70 per barrel than Iran started to attack commercial ships via drones, threatening the fragile memorandum of understanding with the US and sending Brent crude back to $77 per barrel.

With the Middle East having provided a paradoxical meaning to the word "ceasefire" and the world's second most important maritime shipping route for oil and fuel remaining at under 10% of its normal operations, it is not surprising that the oil price continues to act like a yo-yo in a range above $80 per barrel.

During the last week of April and into the first week of May, the price of oil remained above $100 per barrel, providing ample evidence of the continued impasse between the US and Iran. Global energy prices remain hostage to very high levels due to the effective closure of the Strait of Hormuz, which has led to fears of higher inflation worldwide.