South Africa must not underestimate the potential negative economic and business implications that could yet unfold for many economies as a result of the United States (US)-Israel attack on Iran.

Prof. Raymond Parsons, economist from the North-West University (NWU) Business School, says although it is still early days in the conflict, it is already evident that travel and tourism in the Middle East have been disrupted, with flights having been cancelled on a large scale.

“The latest geopolitical developments have raised key questions about the future stability of the political economy of the Middle East. The biggest immediate impact for countries like South Africa will inevitably be the elevated uncertainty about global oil prices, and hence the prospect of higher fuel costs in the months ahead. Oil prices are widely expected to spike in the short-term and stay high for a period – depending on the outcome of the war and in the absence of any new supply measures to offset higher oil prices.”

Prof. Parsons explains that although the Organisation of the Petroleum Exporting Countries (OPEC) has undertaken to increase output soon, the bigger unknown factor is whether the navigation and transport of Iranian oil through the Strait of Hormuz will be disrupted by prevailing war conditions.

“There are conflicting reports about the latest status of the straits. The global oil price outlook therefore basically remains very uncertain in the highly volatile geopolitical circumstances now existing in the Middle East.”