The escalating conflict in the Persian Gulf and renewed surge in global oil prices have heightened concerns about inflationary pressures, prompting economists to warn that the South African Reserve Bank (Sarb) may raise interest rates again this week.

The Monetary Policy Committee (MPC) is set to announce its next rate decision on July 23, just one day after Statistics South Africa releases June consumer inflation data.

Economists argue that the renewed conflict around the Strait of Hormuz has altered inflation expectations, as markets previously anticipated lower oil prices and a stronger rand following the ceasefire announced earlier this year.The Reserve Bank raised the repo rate by 25 basis points in May, lifting the prime lending rate to 10.5%.

Frank Blackmore from KPMG noted that prior to the renewed hostilities, expectations favored maintaining stable rates, but the conflict has shifted the outlook for monetary policy.

Andreas Tindlund from Abax Investments highlighted that rising oil prices are affecting global financial markets and increasing inflation risks for South Africa, with higher bond yields and a weaker rand exacerbating imported inflation.

Both economists expect another 25 basis point rate hike at the upcoming MPC meeting, while cautioning about potential further tightening later in the year.

The article underscores the interconnectedness of geopolitical events, oil prices, and monetary policy decisions, emphasizing their impact on South Africa's economy and households facing higher living costs and bond repayments.