Oil prices surged above the psychologically significant $100 a barrel mark on Friday morning as escalating conflict in the Middle East reignited fears of supply disruptions, adding fresh inflation risks just a day after the South African Reserve Bank (Sarb) opted to leave interest rates unchanged.
Brent crude traded at $100.81 a barrel at 5:30am South African time on Friday after climbing 7% in the previous trading session to settle at $100.69 a barrel.
The sharp increase followed intensified Houthi attacks on Saudi oil tankers, raising concerns about global energy supplies.
The return of triple digit oil prices weighed heavily on investor sentiment across global markets.
According to Anchor Capital’s Morning Comment, “Brent rose 7.0% to settle at $100.69 per barrel, as Houthi attacks on Saudi tankers intensified global supply concerns. The renewed spike in energy prices comes at a sensitive time for South Africa after the Monetary Policy Committee (MPC) on Thursday decided to keep the repo rate unchanged at 7%.”
Despite the decision to hold rates, the jump in oil prices is expected to remain a key inflation risk in the months ahead as higher fuel costs filter through the broader economy.
South African markets ended Thursday in negative territory as investors reacted to both international developments and domestic monetary policy.
The JSE All Share Index declined 1.2% to close at 108,335 points, with mining shares among the biggest losers. Northam Platinum dropped 5.2%, Valterra Platinum fell 4.5%, while gold producers including DRDGold, Sibanye Stillwater, AngloGold Ashanti and Harmony Gold Mining all recorded notable losses.
Retail stocks also came under pressure, with Woolworths Holdings falling 3.9%, Foschini Group losing 3.3% and Shoprite Holdings declining 2.3%.
The rand weakened against the US dollar following the Reserve Bank’s announcement and amid the renewed flight to safe haven assets.
By early Friday morning, the local currency was trading at R16.8307 to the dollar, while the euro traded at R19.1524 and the British pound at R22.4058.
Bond markets also reflected growing investor caution, with the yield on South Africa’s benchmark 10 year government bond rising to 8.98% and the 20 year bond yield climbing to 9.50%.
The oil driven inflation concerns extended across international markets.
Britain’s FTSE 100 Index fell 0.7% as investors worried that higher energy prices could keep inflation elevated and delay interest rate reductions.
In the United States, markets also closed lower. The S&P 500 declined 1.2%, the Dow Jones Industrial Average lost 1%, while the technology heavy Nasdaq dropped 2.2% as investors balanced concerns over artificial intelligence spending alongside rising geopolitical risks.
Asian markets continued the negative trend on Friday morning, tracking overnight losses on Wall Street. Japan’s Nikkei 225 was down 2.8%, Hong Kong’s Hang Seng declined 1.3% and South Korea’s Kospi tumbled 5.9%.
Meanwhile, gold retreated despite ongoing geopolitical uncertainty. The precious metal traded at $4,031.46 an ounce after falling 2% during Thursday’s session as expectations for higher interest rates continued to weigh on bullion prices.
With oil now trading above $100 a barrel once again, markets are expected to remain highly sensitive to developments in the Middle East. Investors will also closely monitor whether sustained higher energy prices begin feeding into global inflation expectations and influence future monetary policy decisions by central banks, including the South African Reserve Bank.
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