It did not take long for the Iran-Israel-United States (US) conflict to spill over into the entire Middle East region, resulting in major disruption to airlines and global shipping routes. The price of Brent Crude surged to north of US$100 per barrel in the immediate aftermath of the conflict, reaching close to US$120, before easing to around US$90, still 30% dearer than its December 2025 fix.
Regardless of the outcome, this conflict will hit businesses and consumers hard. In South Africa, where fuel prices are set each month based on a complex combination of currency exchange rates, oil prices and taxation, motorists are already bracing for a R5-R8 (US$0.3-0.5) per litre surge in fuel prices in April, pushing a litre of 93 octane petrol from March’s R20.19 (US$1.2) per litre as much as 40% higher.
The South African Reserve Bank (SARB) has responded to the crisis, saying that it will revise risk scenarios in light of the conflict’s impact on oil prices before its upcoming Monetary Policy Committee (MPC) meeting, scheduled for 26 March. Indebted South Africans will likely see their hopes for further interest rate relief in the first half of 2026 go up in proverbial smoke.
In conversation with Reuters, SARB governor Lesetja Kganyago explained the decision to leave interest rates unchanged following the previous MPC meeting, held in January. At the time, the adverse scenario was based on oil at US75 per barrel and the rand weakening to around 18.50 units against the US currency. The scenario has been bombed out of existence so to speak, and the central bank will have to go back to the drawing board.
There were two positives from the Reuters exchange. First, the governor noted that the impact of a 10% devaluation of the rand versus the dollar was considered more impactful than a similar move in oil prices – and the rand has stood its ground so far. Second, the SARB MPC weighed price shocks based on whether they were likely transitory or persistent in nature.
“You only respond to the persistent, not to the transitory – and that is not an easy call to make,” he said.
To get a sense of the broader economic impact, Africa Ahead turned to recent commentary by asset manager, Ninety One. Paul Gooden, head of global natural resources at the firm, singled out the effective closure of the Strait of Hormuz as the direct cause of the spike in energy prices, noting that around 20% of global oil supply went to market via that route.
“While the waterway has not been physically blocked, insurance constraints mean vessels are largely unwilling to transit the area,” he wrote. “In practical terms, a significant portion of global supply has been temporarily removed from the market.”
The situation illustrates how quickly geopolitical tensions transmit into global trade through the insurance market. Marine insurers responded to the Middle East conflict by sharply increasing war-risk premiums for vessels transiting the Gulf, in some cases to levels comparable to those seen during active conflict periods.
Reports suggest premiums have risen from roughly 0.25% of vessel value to as much as 3%. For a large crude carrier this can translate into several million dollars in additional insurance costs for a single voyage.
Gooden warned that oil-related supply chain disruptions would have significant knock-on impacts across the refined product spectrum, including diesel, heating oil, jet fuel and petrol. “Refining capacity and logistics create additional bottlenecks; in Europe, for instance, jet fuel prices have already more than doubled this year,” he said. He expected a geopolitical risk premium to persist long after the conflict resolves.
In another press comment, Oswald Kuyler, head of short-term insurance at Consult by Momentum, explained how the Middle East conflict might filter down to insurance consumers.
“If the availability of imported parts and goods becomes constrained, repair times for claims, particularly in motor insurance, may lengthen, and the cost of repairs could increase as parts become more expensive or harder to source,” he said. Insurers will respond with higher premiums, higher excesses or adjustments to policy terms.
Momentum warned that higher inflation and potentially higher interest rates would place additional strain on household budgets, prompting many consumers to review their insurance covers.
“The key takeaway is for policyholders to review cover carefully and seek advice before making changes,” Kuyler concluded. “In a more volatile economic environment, understanding what your policy covers becomes more important than ever.”
The current Middle East conflict illustrates how geopolitical risks transmit through the business and consumer economies. Conflict disrupts shipping routes, pushing oil prices higher and creating shortages and price pressures for refined products. These pressures then feed into the cost of general goods and services, driving inflation and forcing central banks to delay promised interest rate cuts, or even tighten monetary policy further.
In an interconnected world, disruption in the Strait of Hormuz is rarely confined to the Strait for long. And you can rely on insurers and reinsurers, who are hell-bent on trading sustainably, to adjust their rates to reflect this dynamic reality.
Geopolitics and the consequences of a Middle East conflict featured strongly in most insurers’ sustainability debates entering 2026. In its Integrated Report 2025, South Africa’s largest general insurer, Santam Limited, conceded that it was operating in an environment defined by “heightened geopolitical tensions and extreme weather events” in addition to cyberattacks and the risk multiplier of deteriorating infrastructure.
Santam CFO, Wikus Olivier, offered a brief comment on how today’s Iraq-Iran-US interplay weighed on the insurer’s prospects. “The recent escalation of conflict in the Middle East is expected to give rise to heightened volatility as well as potential secondary economic impacts,” he wrote. “These conditions will likely impact the investment return earned on insurance funds, the investment margin earned by the alternative risk transfer businesses and the net investment return earned on capital in 2026.”
There is also little doubt that the combination of oil price rises and disruptions to global supply chains will introduce inflationary pressures. Inflation feeds through to insurers most directly at the claims paid level because the cost of repairing or replacing vehicles or equipment and rebuilding damaged property rises materially as inflation rises.
Elsewhere in its Integrated Report 2025, Santam noted that annual growth in the size of its book was loosely projected as CPI plus GDP plus 1-2%. The basic premise is that premium growth must exceed economic growth and inflation. In this context, a war introducing inflationary pressures may slightly increase the insurer’s gross written premium (GWP) in 2026.
Santam enjoyed a stellar 2025, reporting R44 billion (US$2.6 billion) GWP from its conventional insurance business, a net underwriting margin of 11.3% and group operating earnings of R5.66 billion (US$335.25 million). If the current supply chain disruption persists, pushing inflation higher, the group could see 2026 GWP come in slightly higher than expected, but its claims paid will erode the underwriting margin, while inflation-linked increases in operating expenses will further constrain group earnings.
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