Equities got a shock on Israel bombing

 The JSE and the Rand followed global financial markets on Friday and fell sharply on the news of Israel’s military raids on Iran.

In reaction oil prices surged and investors flocked to the dollar and gold as safe havens.

The Rand at one stage on Friday lost thirty cents against the US$ and traded above the R18.00/$ on R18.07/$ but improved at the close to R17/90$.

The ALSI lost 1.76% on the day after the index broke through the 97 000 level for the first time on Thursday.

For the week ALSI lost 1.3%.

The gold price shot up by $50 on Friday closing at $3 443.

Oil at one stage on Friday was up by $7 per barrel at $77.23 but came back again at the close to R74.00/ barrel.

By Thursday last week, the petrol price was over recovered by seven cents and diesel by ten cents per liter (meaning prices should come down).

This may change quickly in the weeks to come.

Analysts worry that a repeat of the Russia-Ukraine war my surface with the oil price igniting global inflation and recession.

It is already expected that the US Federal Reserve this coming Wednesday will announce that it will keep rates unchanged. 

Israel has declared a state of emergency on intelligence that Tehran had launched one hundred drones in retaliation.

Derren Nathan, the head of equity research at Hargreaves Lansdown, said: “It’s not just the outlook for Iranian exports that’s a concern but also the potential for disruption to shipping in the Persian Gulf’s strait of Hormuz, a key route for about 20% of global oil flows and an even higher proportion of liquified natural gas haulage.”

The Strait of Hormuz, positioned in between the Persian Gulf and the Gulf of Oman, is a narrow but critical sea route that carries approximately one-third of global oil trade.

Major other commodities like grain and the transport of commercial goods from east to west make it one of the most strategic trade passages in the world.

Global equity markets 

The attack of Isreal on Iran shocked world equity markets on Friday.

The Dow Jones Industrial Average closed Friday, 1.8% lower, the S&P 500 lost 1.13% and the Nasdaq Composite 1.3%.

In Europe, the Europe stocks (. STOXX), plummeted 1.3% on Friday, and in Asia, major bourses in Japan, South Korea, and Hong Kong fell over 1% each. 

Tariq Kakish, deputy CEO at FH Capital in Abu Dhabi on Friday said.

"We do expect market volatility in the Middle East to continue as political instability remains the key factor affecting investors' sentiments,". He however remarked that these hostilities between Iran and Israel had normally causes only short impact on markets. "We believe this will have a similar pattern," he said.

Prospects for this coming week

Apart from the geo-political downside risks from the latest Isreal/Iran conflict, this coming week domestic and foreign investors await the release the interest rate decision by the US Federal Reserve on Thursday.

It is expected that the Federal Open Market Commission (FOMC) will keep its bank rate unchanged. STATSSA will announce South Africa’s inflation rate on Wednesday.

It is expected that the annual increase in the CPI during May 2025 was 2.7% down from 2.8% in April 2025.

This would be the third consecutive month the inflation rate will be lower than the new proposed target of 3.0%.

The Rand and equity prices should react positively to this data. STATSSA will also release the retail sales data for April on Wednesday. The Bank of England (BoE) will also make its interest rate decision on Friday.

Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education. 

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