Last week, the Israel-Iran war dominated news headlines, as the conflict drove a risk off sentiment in global markets, a trend that is likely to continue following US air strikes against three Iranian nuclear facilities over the weekend. Locally, the Financial Action Task Force (FATF) announced that South Africa has successfully completed all 22 action items from its grey listing Action Plan.
International Market Developments
The Israel–Iran conflict has escalated sharply, with Israeli airstrikes reportedly targeting over 20 sites in and around Tehran, including nuclear facilities. In retaliation, Iran launched ballistic missiles into Israel, one striking a hospital. Initially, U.S. President Donald Trump deferred a decision on American involvement, signalling a potential window for de-escalation. However, over the weekend, he authorised US action against three nuclear facilities in Iran, a move that takes the conflict into a new phase. Despite the serious geopolitical risks, global markets reflected only a muted reaction last week, as investors appeared to have priced in political volatility. However, the latest developments will change the dynamic yet again, further testing the resilience of asset prices. Much may depend on whether and how Iran chooses to retaliate, including the possibility that it will look to close the Straits of Hormuz, a key shipping lane for oil supplies.
The Federal Reserve opted to keep interest rates steady at its June 2025 meeting, reflecting growing caution amid persistent inflation and slowing growth. While officials still project two rate cuts in 2025, divisions are emerging—seven members now see no cuts this year, up from four in March. The outlook has become more complex due to Trump’s expanded tariffs, which are expected to pressure prices and dampen economic activity. Despite these challenges, the median federal funds rate projection remains at 3.9%, indicating a continued restrictive stance. Overall, the Fed’s cautious tone underscores a data-dependent approach.
Looking ahead, US core PCE price index, which excludes volatile food and energy prices and is the Federal Reserve’s chosen gauge of underlying inflation is due for release on Friday.
Local Market Developments
Last week, the Financial Action Task Force (FATF) announced that South Africa has successfully completed all 22 action items from its grey listing Action Plan, marking a significant milestone toward being removed from the FATF grey list. This follows South Africa’s grey listing in February 2023 due to deficiencies in its anti-money laundering and counter-terrorism financing frameworks. An on-site visit will take place ahead of the October 2025 FATF Plenary, where a positive assessment could lead to South Africa’s formal delisting.
Looking ahead, SA producer inflation data is due for release on Thursday.