A week after the Federal Open Market Committee (FOMC) increased interest rates in the US, more uncertainties appeared on domestic and foreign equity, bond, and foreign exchange rate markets.
President Trump attacked Iran verbally at the 81st United Nations General Assembly, when he delivered an aggressive speech threatening to "annihilate" the Islamic Republic of Iran "and do it quickly".
Oil prices increased sharply last Tuesday from $97 per barrel to as high as $107 last Thursday. President Trump on Wednesday revealed that diplomatic US Iran talks (facilitated by Qatari mediators) took place on the sidelines of the UN, offering a glimmer of hope that the Strait of Hormuz could eventually be opened again.
The Brent oil price started to recover but still closed on Friday at $104.32pb, still worryingly high as negotiations remain vulnerable. These developments put global equity prices and bond rates under pressure as they pulled back.
Together with these uncertainties, the news that South Africa’s inflation rate increased only marginally from 4.3% in July to 4.4% in August raised hope that the Monetary Policy Committee (MPC) would abstain from increasing its repo rate at the end of its meeting on Wednesday afternoon.
In contrast, the MPC took a hawkish stance and not only raised the repo rate by 0.25 percentage points but warned that further increases may be on the cards.
The MPC cautioned that, given the current sharp rise in oil prices, triggering fuel prices to accelerate in September to increase by more than R3.00 per litre in October is likely to push expected inflation to 5.0% and higher in the following months. On Friday, the price for 95 ULP was under recovered by 300 cents per litre and for 0.005% diesel by 307 cents per litre.
Apart from the above nervous sentiment, the continuous contraction in the prices for Gold ($103), Platinum ($30) and Palladium ($50) led to a sharp worsening of equity prices on the JSE and the Rand/$ exchange rate. The ALSI lost 2 176 (1.9%), the Industrial 25 Index (0.06%), the Financial 15 Index (1.1%), the Resources 10 Index (4.0%) and the Metals and Mining Index (5.2%). On the capital market, the All Bond Index (ALBI) increased from 8.78% earlier in the week to 8.92% (1.6%) by Friday, September 25, 2026.
Global equity prices show some resilience
Despite the negative sentiment on the world oil markets after President Trump’s attack on Iran in his speech last week, share prices on developed markets stood their ground last week.
On Wall Street, the Dow Jones Industrial Index closed for the week 0.28% higher, the S&P 500 gained 1.2% and the NASDAQ increased by 2.06%.
In the UK, the FTSE 100 last week gained 0.35%, the DAX in Germany was up by 0.37% and the CAC 40 in Paris increased by 0.16%. The MSCI World Index was stronger by 0.82%.
Prospects for the coming week
The focus on equity, bond and exchange rate markets this week will be on the reaction by the US to the Iranian proposal for a deal that would see the Strait of Hormuz reopened within a week.
On the economic front, investors await the release of the US core Personal Consumption Expenditure (PCE) price index for August this coming Wednesday.
The PCE price index is the main index that the Fed uses as an inflation indicator.
The US will also on Wednesday publish the final estimation of its GDP growth rate during Q2, as well as personal income and spending data for August. On Friday, the all important US non farm payrolls for September will be announced.
Domestically, the Treasury will release South Africa’s budget balance as at the end of August on Wednesday.
It is expected that the Government’s basic budget balance deficit of R161 billion came down to R50 billion, and is on track to record a surplus for the 2026/27 book year.
Chris Harmse is the consulting economist of Sequoia Investment Solutions and a senior lecturer at Stadio Higher Education.
**The views expressed do not necessarily reflect the views of the National Media Group.
