March market volatility: How Iran’s war is shaping the Rand

March did not ease into volatility. It was pulled into it, quickly and decisively, by events far beyond South Africa’s borders. At the centre of that shift sits the war in Iran, which has become the single most important driver of global markets right now.

What began as a geopolitical escalation has evolved into a full risk event, pushing oil prices higher, disrupting key shipping routes, and forcing investors to reassess everything from inflation to interest rates.

For the Rand, this matters in a very direct way. South Africa imports oil, which means higher global energy prices and a weaker currency reinforce each other. Add to that a global move toward safety, where capital flows into the US Dollar, and the result is exactly what we saw through March: a sharp, sustained weakening of the Rand.

Rand slides as global risks outweigh local stability

The market moves reflect this clearly. USD/ZAR rose from 16.10 at the start of the month to 17.11 by the end, marking a depreciation of just over 6%, while GBP/ZAR moved from 21.60 to 22.62, a near 5% decline in the Rand against sterling. These are not small moves, and importantly, they did not happen in isolation. The Dollar itself strengthened against the Pound, reinforcing the broader theme of global risk aversion.

What stands out is that these moves were not driven by a deterioration in South Africa’s domestic outlook. If anything, the starting point for the month was relatively stable, with inflation contained and growth modestly improving.

But in a market dominated by geopolitical risk, local fundamentals take a back seat. The driver is no longer what South Africa is doing, but what is happening in global energy markets and how investors are responding to uncertainty.

Central banks cautious amid energy-driven uncertainty

That shift has also changed the way central banks are thinking. SARB held rates steady at 6.75%, but the message was more cautious than before. The focus has moved toward the inflationary impact of higher oil prices and a weaker Rand, with expectations that headline inflation will drift back toward 4% in the near term.

Globally, the same tone is evident. The Fed and the Bank of England both held rates, but neither signalled urgency to cut. Instead, the emphasis is on waiting to see how the energy shock feeds through into broader inflation.

This matters because it shifts expectations. Earlier in the year, markets were pricing in a gradual easing cycle. March disrupted that narrative and replaced it with something more uncertain, where rates stay higher for longer, and the Dollar remains supported.

Rand volatility spikes as markets turn headline-driven

What we are seeing, in effect, is a market that has moved from a data-driven environment to a headline-driven one. The war in Iran has become the anchor for volatility, and everything else feeds off it. Oil prices influence inflation expectations, which shape central bank decisions, which in turn drive currency movements.

The Rand, as a risk-sensitive emerging market currency with direct exposure to energy costs, sits right in the middle of that chain. This is why volatility has picked up and why price action has become less predictable. Moves are sharper, reactions are faster, and sentiment can shift quickly on new information.

Rand outlook hinges on Iran conflict and global risk factors

Looking ahead, the direction of the Rand will remain closely tied to how this geopolitical situation evolves. If the conflict escalates or continues to disrupt oil supply, the pressure on the currency is likely to persist. If there is a credible path to de-escalation, some of that pressure can unwind just as quickly.

Alongside this, global interest rate expectations and US data releases will continue to play a supporting role, particularly in shaping the strength of the Dollar.

For clients, the key takeaway from March is not just the scale of the move, but the nature of it. In periods like this, volatility tends to cluster around events, and timing becomes less about precision and more about managing risk. The environment we are in is one where external shocks dominate, and for now, the war in Iran remains the central force shaping the currency market.

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