When the US and Israel started pounding Iranian targets on February 28, they envisaged a swift military campaign and a decisive victory. Four months later, the world is in limbo as the US and Iran struggle to negotiate a resolution to the war. A fragile ceasefire has mostly held since 8 April, despite some skirmishes, but the Strait of Hormuz remains effectively choked and global energy markets continue to face severe disruption. The question is how long this stalemate can last.
As the war grinds on, it looks increasingly unlikely that US President Donald Trump and his allies in Israel will realise their full strategic objectives. Iran’s theocratic regime seems even more firmly entrenched than it was before the war, and the country’s missile arsenal, though degraded, is far from destroyed. Supreme Leader Mojtaba Khamenei and his aides have signalled that capitulation is out of the question.
Meanwhile, the pressure on Trump to end the war continues to mount. Although the US is less exposed to energy shocks than Europe and some Asian economies, American consumers are feeling the pain at the gas pump. Trump rode to victory in the 2024 presidential election on the back of a promise to bring inflation and energy costs down. Instead, US gasoline prices recently hit $4.30 a gallon, levels not seen since 2022.
History shows that US presidents’ political fortunes are directly tied to the cost of fuel, and there are signs that the war is depleting Trump’s popularity with his base. His approval rating has sunk below 40%. Prediction markets and polls favour the Democrats to swing control of the House in November’s mid-term elections. Both chambers of Congress have now passed war powers resolutions demanding that Trump seek congressional approval, a symbolic rebuke that reveals his control over the Republican Party is slipping.
Against this backdrop, Trump has sent signals that he is seeking an offramp for the war in Iran. Reports suggest that he is reluctant to resume full hostilities with Iran. Renewed bombardment risks triggering further Iranian attacks on Gulf energy infrastructure and even tighter restrictions on Strait of Hormuz traffic – in turn, raising risks of an even worse energy shock.
Iran, as a repressive theocracy with a shattered economy worn down by years of sanctions, may have more capacity to endure pain than the Trump administration. Tehran’s rulers are betting that they can hold out longer than Trump to secure a peace agreement that favours their terms. They are bargaining that rising economic costs, political pressure, and voter fatigue will force Washington to accept a narrower settlement than it originally sought.
Iran’s continued drone and missile harassment of Gulf states has been calibrated to keep pressure on without crossing the threshold that would force Trump’s hand. This sets the stage for a war of attrition in which endurance and patience may matter as much as military strength. Time may be on Iran’s side as inflationary pressures build, fuel inventories run low and supply chain disruptions compound in the US and the rest of the world.
Conversely, the longer the conflict continues, the weaker Trump’s position seems. Trump may increasingly find himself forced into compromises he once ruled out, including releasing frozen Iranian funds and quietly shelving the aim of regime change. A peace deal may constrain Iran’s nuclear ambitions, but it will most likely fall short of the “unconditional surrender” Trump once demanded.
If and when peace comes, the world is unlikely to settle back into the prewar status quo any time soon. Full normalisation of energy capacity and supply chains will most certainly take longer than several months. An inflationary wave cannot be ruled out. The European Central Bank has already hiked rates in response to inflationary pressure, and the Fed may be forced to follow suit.
The possibility of renewed hostilities also cannot be dismissed. The probability may be low, but the consequences would be another energy shock, higher inflation, tighter monetary policy and a sharp reassessment of risk assets.
In this context, equities markets have held up remarkably well, continuing to set new records this week on the back of the AI boom. One can only speculate about how much higher the market returns may have been in the absence of this war and its impact on energy markets.
“The power to hurt is bargaining power.”
– Economist and Nobel laureate Thomas Schelling
“In war, one’s ability to withstand pain is even more important than one’s ability to inflict pain.”
– Bridgewater Associates founder Ray Dalio
Global News
- Prospects for a ceasefire between the US and Iran remained uncertain on Thursday after Iran said negotiations had stalled, despite Trump’s insistence that talks are in their final stages. Hezbollah’s rejection of a US-backed truce proposal in Lebanon highlighted the challenges of securing a broader regional de-escalation. As the war enters its fourth month, reduced oil shipments through the Strait of Hormuz are keeping oil prices elevated, with Brent crude trading near $96 a barrel and traffic through the waterway still well below pre-war levels. Persistent inflation concerns are reinforcing expectations that central banks will keep interest rates higher for longer, weighing on gold, which fell below $4,450 an ounce on Friday.
- A majority vote in the Republican-controlled House on Thursday approved a war powers resolution requiring Trump to withdraw US forces from hostilities against Iran unless Congress authorises military action or declares war. The move reflects growing unease within Trump’s own party over a conflict that has now lasted more than three months, raising questions about the political support for further US military involvement even as the administration insists it is close to securing a ceasefire.
- Energy prices are likely to remain elevated after oil industry experts told OPEC+ on Monday that disruption to oil flows through the Strait of Hormuz could persist through the end of the year even if the waterway reopens quickly. The assessment echoed comments by Adnoc CEO Sultan Al Jaber, who said Middle Eastern oil exports would not fully recover until well into 2027 even if the Iran conflict ended immediately, underscoring the lasting impact of the crisis on global energy supplies.
- The dollar is expected to remain range-bound in the near term before weakening later this year, according to a Reuters survey of foreign-exchange strategists published on Tuesday. While higher oil prices and inflation pressures linked to the Middle East conflict have supported the US currency and clouded the Fed’s policy outlook, most analysts expect those factors to prove temporary. Strategists continue to forecast a weaker dollar over the medium term, although geopolitical uncertainty and inflation risks have increased the range of potential outcomes.
- The International Monetary Fund (IMF) urged the Fed to proceed cautiously with interest rates ahead of new Chairman Kevin Warsh’s first policy meeting later this month, warning that inflation risks remain elevated due to higher energy prices and the pass-through effects of tariffs. IMF spokesperson Julie Kozack said on Thursday that inflation is now expected to return to the Fed’s 2% target only by the end of 2027, later than the IMF’s previous forecast of mid-2027 and stressed that future policy decisions should be carefully calibrated to incoming economic data.
- US job openings rose to 7.62 million in April, the highest level in nearly two years, while layoffs declined, signalling continued resilience in the labour market. The Bureau of Labor Statistics reported on Tuesday that job openings increased from 6.89 million in March and exceeded economists’ expectations of 6.87 million. The stronger-than-expected data suggest labour demand remains robust after a subdued 2025 and could reduce pressure on the Federal Reserve to cut interest rates.
- US technology companies announced 38,242 job cuts in May, the highest monthly in nearly two years, as spending on AI continues to accelerate, according to Challenger, Gray & Christmas data released on Thursday. The sector has announced more than 123,000 layoffs so far this year, up more than 65% from the same period in 2025, with AI now the leading reason companies give for cutting jobs. However, technology companies also reported the strongest hiring plans of any sector, suggesting AI is reshaping the mix of jobs rather than simply reducing employment.
- The European Commission warned on Wednesday that higher energy prices linked to the US-Iran conflict could put up to 1.3 million EU jobs at risk this year, underscoring the economic impact of the energy shock. The automotive sector faces the largest potential losses, with 600,000 jobs at risk, while metals, chemicals, construction and transport are also vulnerable. The Commission said lower-income households could spend an additional 1.4% of their income on transport fuel as energy costs rise.
- China introduced sweeping new rules on Monday, tightening oversight of overseas transactions involving Chinese investors, technology and data, following Beijing’s order requiring Meta to unwind its acquisition of AI startup Manus. Effective next month, the framework allows authorities to reverse completed deals, restrict unauthorised cross-border talent transfers and penalise companies from countries that limit Chinese investment, increasing regulatory risks for global investors in China’s technology and AI sectors.
- China’s semiconductor rally is expected to continue as upcoming IPOs and technological breakthroughs bolster investor confidence in the country’s push toward chip self-sufficiency. The CSI Information Technology Index has doubled over the past year, while investors are closely watching the planned listings of memory-chip makers ChangXin Memory Technologies and Yangtze Memory Technologies. Sentiment has also been supported by Huawei’s unveiling of a new chipmaking architecture, reinforcing expectations that Chinese firms can narrow the gap with global rivals despite US export restrictions.
- AI is already generating “insane” returns, according to Nvidia CEO Jensen Huang, who on Tuesday sought to counter concerns about massive AI spending and its long-term profitability. Speaking to representatives from financial institutions and wealthy family offices, Huang said AI is creating trillions of dollars in value and dismissed concerns over soaring valuations and the monetisation of the technology following heavy investment in data centres.
- Alphabet increased its equity offering to $84.75 billion on Wednesday, up from the $80 billion announced two days earlier, to accelerate AI investment. The package includes a $40 billion at-the-market share programme, a $10 billion investment from Berkshire Hathaway and additional common, capital and depositary share offerings. The move highlights the escalating capital requirements facing major technology companies as competition to build AI infrastructure and data centres intensifies, with Alphabet’s fundraising set to become the largest equity capital markets transaction on record.
- Nvidia unveiled a new PC chip, RTX Spark, on Monday that is designed to run AI agents directly on PCs rather than relying on cloud computing as part of its Microsoft partnership. The launch expands Nvidia’s push beyond AI training chips into the fast-growing AI inference market and intensifies competition with AMD, Intel, Apple and Qualcomm. Shares of rival PC chipmakers fell sharply following the announcement as investors welcomed Nvidia’s move into what many expect to be a major new market for AI-enabled devices.
- Microsoft on Tuesday launched a broad range of AI initiatives, including autonomous workplace assistants, AI-powered devices, Nvidia-backed PCs and a new in-house reasoning model, as it seeks to reshape computing around AI. This marks a shift away from traditional software interfaces towards AI agents capable of carrying out complex tasks autonomously. Microsoft is also moving to control more of the AI technology stack and deepen enterprise adoption as competition from OpenAI and Anthropic intensifies.
- Meta unveiled a new AI agent for businesses on Wednesday that helps handle day-to-day operations, including booking appointments and closing sales. The company also launched a business agent platform that integrates with external systems, such as Shopify, thereby expanding its AI offerings beyond its existing chatbot services. The tools are being introduced via WhatsApp and will later roll out to Instagram, marking a significant expansion into the enterprise AI market and positioning Meta in direct competition with OpenAI and Anthropic.
- OpenAI’s ChatGPT surpassed one billion monthly active users globally, becoming the fastest application to reach the milestone roughly three years after launch, outpacing Google Maps, TikTok, Instagram and YouTube, according to Sensor Tower data released on Wednesday. However, Anthropic’s Claude is gaining ground rapidly, with 56 million monthly active users and year-on-year growth of about 640%, compared with 62% for ChatGPT. Sensor Tower found that US ChatGPT users who installed Claude spent 5% less time on ChatGPT a month later, suggesting competition in the AI assistant market is intensifying.
- DeepSeek is seeking to raise about 50 billion yuan ($7.4 billion) from investors, including Tencent Holdings, according to sources on Wednesday, in a funding round that could value the Chinese AI startup at between $52 billion and $59 billion. The raise would mark a significant shift from DeepSeek’s longstanding strategy of avoiding external capital and highlights how escalating computing and infrastructure costs are driving AI companies to seek ever-larger funding rounds.
- SpaceX plans to raise $75 billion in what would be the largest IPO in history, valuing the company at nearly $1.77 trillion, according to filings released on Wednesday. The company is negotiating underwriting fees of less than 0.75%, which would still generate about $500 million for Wall Street while potentially reshaping fee expectations for future mega-listings. Elon Musk will retain 84.4% voting control after the offering, with SpaceX set to begin trading on Nasdaq under the symbol SPCX on 11 June.
- The world’s wealthy became even richer in 2025, with assets held by individuals worth at least $1 million rising nearly 9% to a record $98.3 trillion, according to a Capgemini report released on Thursday. Stock market gains driven by enthusiasm for AI helped create almost two million new millionaires, taking the global total to a record 25.3 million. The biggest gains were enjoyed by ultra-high-net-worth individuals with assets of $30 million or more, highlighting how the AI-driven market rally is increasingly concentrating wealth among the world’s richest investors.
- As at Thursday’s close the S&P 500 was 0.2% down for the week.
Local News
- Reserve Bank Governor Lesetja Kganyago said inflation excluding fuel prices is beginning to rise and is expected to peak in the first quarter of 2027, indicating that higher fuel costs are starting to filter through to the broader economy. Speaking at the inaugural Tito Mboweni Memorial Lecture on Thursday, Kganyago said the South African Reserve Bank cannot directly offset short-term shocks such as higher oil prices and is instead focused on preventing these temporary increases from feeding into wider inflation pressures and becoming more persistent.
- South Africa is among 60 countries that Trump threatened on Tuesday with tariffs of at least 10%, citing concerns that foreign producers are failing to prevent the import of goods made using forced labour. Trade, Industry and Competition Minister Parks Tau has asked Washington to provide evidence supporting the allegations so that the government can formulate an effective response. The proposed measures remain subject to public hearings scheduled for 7 July before any tariffs are finalised.
- The rand has gained around 5% since early April as foreign investors returned to South African bonds, attracted by high real yields, easing market volatility and confidence in South Africa’s economic reform story. Bloomberg reported on Wednesday that non-residents have purchased a net R37 billion of government debt since April, following a record selloff in March, helping the currency recover from losses suffered after the outbreak of the Iran war and subsequent market volatility.
- South Africa recorded a primary budget surplus of 1.1% of GDP in the year to March, exceeding the National Treasury’s February forecast of 0.9% and marking a third consecutive surplus. National Treasury Director-General Duncan Pieterse said on Tuesday that stronger-than-expected revenue and lower spending helped improve the fiscal position, while government debt has stabilised and is expected to decline over the medium term. The main budget deficit narrowed to 4.3% of GDP from a projected 4.6%, reinforcing South Africa’s fiscal consolidation efforts and supporting prospects for future credit-rating upgrades.
- South African Revenue Services Commissioner Johnstone Mabhuku unveiled plans on Wednesday to intensify the fight against illicit trade, which the tax authority estimates is worth R1.2 trillion, or about 15% of GDP, and results in up to R300 billion in lost tax revenue annually. The strategy includes a new QR-code product verification system modelled on track-and-trace programmes in Turkey and Kenya.
- South Africa’s electricity generation fell 9% year on year in April, marking the 11th consecutive month of decline, while electricity consumption dropped 5%, according to Statistics South Africa data released on Thursday. The data suggest that weaker demand from energy-intensive industries is contributing to the decline, although they do not fully capture self-generated renewable energy, including rooftop solar installations, which have become increasingly common among households and businesses.
- Coal prices rose 35.8% year-on-year in May as strong Asian demand and disruptions to global oil and LNG supplies linked to the Middle East conflict boosted demand for alternative energy sources. South Africa, which generates about 90% of its electricity from coal and remains a net coal exporter, is benefiting from higher prices and improved rail and port performance, with coal exports up 8.2% year to date. Investec noted on Wednesday that global supply shortages have intensified and manufacturing activity has accelerated as businesses bring forward purchases amid concerns over rising costs and potential supply-chain disruptions.
- Business confidence fell sharply in the second quarter, with the RMB/Bureau for Economic Research Business Confidence Index dropping eight points to 39 after two quarters of gains. The survey, released on Tuesday, attributed the decline largely to higher fuel prices and tensions in the Middle East, which shifted expectations from interest-rate cuts to possible hikes. Confidence weakened across most sectors, with only manufacturing recording a modest improvement. Despite the setback, the index remains broadly in line with its long-term average.
- The EU launched a €12 billion investment roadshow in South Africa on Monday to accelerate projects under the Clean Trade and Investment Partnership agreed earlier this year. The initiative seeks to unlock investment opportunities in strategic sectors, including clean energy and critical minerals, while strengthening economic ties between European and South African businesses. Tau said the focus should be on investment that supports industrialisation and value addition rather than the export of raw materials alone.
- The medical schemes industry is facing mounting pressure from rising healthcare costs, an ageing beneficiary base and higher claims utilisation, with restricted schemes paying out more in claims than they collected in contributions during 2024. A new AlexForbes report released on Wednesday showed that, in 2024, the overall risk claims ratio rose to 96.2% from 95.8% in the prior year, while restricted schemes hit 101.3%. The industry recorded an operating deficit of R11.64 billion, up from R10.20 billion, forcing many schemes to rely on investment income to absorb costs.
- Business Leadership South Africa (BLSA) warned on Thursday that Johannesburg’s worsening fiscal and governance crisis risks undermining South Africa’s economic recovery, describing the situation as urgent given the city’s contribution of about 16% to national GDP. The warning followed the Auditor-General’s findings that the city lost R8.5 billion through water and electricity losses in 2024/25, amid weak controls and poor oversight. BLSA said years of administrative failures have weakened service delivery and financial management, and cautioned that private-sector support would require a capable and accountable municipal partner.
- BMW revealed on Wednesday that AI systems developed at its Pretoria IT Hub are now being used across BMW, Mini and Rolls-Royce factories worldwide to inspect vehicles and detect production defects in real time. The hub, which has grown from 11 employees in 2006 to more than 2,600 staff, is BMW’s largest IT operation outside Germany and has become a key centre for the group’s global AI development. BMW said the Pretoria team is also building AI solutions for use across the business and managing the company’s internal AI marketplace, underscoring South Africa’s growing role in the development of industrial AI.
- Ninety One reported a near-one-third increase in assets under management for the year to March, supported by its Sanlam book acquisition, net inflows, and favourable market and currency movements. The group said on Wednesday that operating profit rose 12%, while headline earnings per share increased to 17.5p from 17.2p. Adjusted earnings per share were revised to reflect the additional shares issued to Sanlam as part of the transaction.
- As at the time of writing, the rand was 0.5% weaker against the dollar, and the ALSI was 1.9% down for the week.
Sources: Dynasty, IOL, Moneyweb, Reuters, Bloomberg, ITWeb, Daily Investor, Business Day, TechCentral, etc.
