Crude Awakening: When Global Tensions Hit and Oil Prices Rise

2 Min Read | 462 Words

Tensions in the Middle East are back in investors' crosshairs. On June 21, U.S. jets struck Iran’s key nuclear sites(Fordow, Natanz, and Esfahan) with president Trump taking responsibility. Iran has responded with threats to close the Strait of Hormuz, the vital maritime chokepoint through which about a fifth of the world’s oil flows daily.

That looming threat, if realised, could send global oil prices surging. Analysts suggest prices could easily breach US$100 per barrel, with some forecasts pushing to $120 if the strait is blockaded. Already, Brent crude has risen ~18% over recent weeks, climbing to its highest level in five months.

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Energy Costs: The Ripple Effect

Oil price spikes filter straight into transport, manufacturing, and logistics costs which in turn directly weaken operating margins for companies around the globe. CFOs must rapidly decide whether to absorb costs, pass them on, or re-engineer processes. South African firms, already juggling load-shedding and its related reliance on back-up power, specifically generators poses major risks alongside rand weakness, and inflation-linked wage pressure all contributing to specific vulnerability of local businesses.

Logistics & Freight Costs

Taking a deeper look at the impact on transport costs, shipping insurance premiums and tanker freight rates have already jumped with insurance costs climbing amid GPS jamming and naval threats, while freight rates are up ~90% compared to early June.

Businesses in the import/export sector, notably in SA, must account for these cost increases.

Hedging: A Competitive Advantage

In volatile environments, hedging can become a key pillar of financial strategy. Whether through commodity futures, FX forwards, or interest rate swaps, effective hedge design can protect gross margins, smooth cash flows, and signal resilience to investors.

But it comes with its own major risks. Finance leaders must ensure that hedging strategies are tied to the firm's operational realities and risk appetite. For CA(SA)s, this means going beyond the debit-credit mechanics of hedge accounting under IFRS, and stepping into the advisory role which helps companies evaluate hedge effectiveness, forecast exposures, and use derivatives as a source of financial agility which helps them mitigate risk within their risk appetite.

Roundup: Why This Matters for Future CAs

Oil isn’t just fuel, it’s a major component of finance. When geopolitical tensions flare up, energy markets move fast, and so must CFOs, analysts, and advisory professionals. From rising transport costs to margin pressure, hedge strategies to freight premiums, this crisis shows how global events can squeeze local businesses.

For aspiring CA(SA)s, it’s a case study in connecting the dots: macro risk → financial exposure → strategic response. Whether you're building models, evaluating risk disclosures, or guiding integrated reports, you’ll need more than textbook answers.

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