Market Insight | October 2026
September 2026 in review: how one oil shock travelled through inflation, interest rates, bond markets and the dollar to the JSE and the rand.
Prepared by Johan Schönken Jnr, FAIS Representative under supervision
The month in one sentence
Oil above $100 a barrel kept inflation sticky, which pushed four major central banks – including our own Reserve Bank – to raise interest rates, sending long-term bond yields to multi-decade highs, lifting the dollar, knocking gold and platinum, and pulling the resource-heavy JSE and the rand lower.
Executive summary: six links in one chain
September was not a month of six separate headlines. It was one story told in six steps, each one causing the next. Seeing the chain explains why the JSE fell even though nothing dramatic happened inside most South African companies.
- Oil. The conflict involving Iran entered its eighth month. Talks over reopening the Strait of Hormuz stalled and attacks on tankers and Gulf infrastructure continued, so Brent crude rose roughly 14% to about $103 a barrel, after touching $110. Diesel and jet fuel prices rose even faster than crude.
- Inflation. Energy is an input into almost everything, so the oil shock is feeding into prices. US inflation held at 3.4%, the eurozone confirmed 3.2% for August and UK inflation rose to 3.1%. In South Africa, consumer inflation was 4.2% in August, already above the top of the new 2–4% tolerance band around the 3% target, with fuel prices up 20.1% on the year. The Reserve Bank expects inflation to rise above 5% late in 2026.
- Interest rates. Central banks decided they could no longer “look through” the energy shock. The US Federal Reserve raised rates for the first time since 2023, the European Central Bank for the second time this year, the Bank of Japan to its highest level since 1995, and the SARB by 0.25 percentage points to 7.25%. The Bank of England held, but only by a 6–3 vote.
- Bond yields. Higher expected rates, sticky inflation and heavy government borrowing pushed long-term yields up. The US 10-year yield ended September at 5.29%, its highest in nearly two decades. The UK 30-year passed 6% for the first time since 1998, and Japan’s 10-year broke 3% for the first time in three decades.
- Dollar & metals. Higher US rates made the dollar more attractive, and the US dollar index rose about 2%. Gold fell about 6% and platinum about 4%: when cash and bonds pay more, metals that pay no income lose some of their appeal.
- JSE & rand. The JSE leans heavily on mining shares, so the metals sell-off hit home. The Resource index fell 9.8%, dragging the All Share Index down 5.8%, while the rand weakened about 1.5% to around R16.42 to the dollar. Cash (+0.6%) beat bonds (0.0%) for the month.
This was a sharp month, not a broken market. The same resource shares that powered August’s rally led September’s decline. The single biggest swing factor from here is the oil price, and with it, how long central banks need to keep rates high.
September at a glance
How the main markets moved in September. Green bars rose, brown bars fell.
Key levels at month-end
| Indicator | Level at end-September | What changed |
|---|---|---|
| SA repo rate | 7.25% | Up 0.25 percentage points on 23 September (unanimous) |
| Prime lending rate | 10.75% | Up from 10.50% |
| SA inflation (CPI, August) | 4.2% | Above the 4% top of the new tolerance band (fuel +20.1%) |
| SA 10-year government bond | ~8.96% | Briefly above 9%, highest since April |
| Rand / US dollar | ~R16.42 | Weaker by about 1.5% |
| Rand / euro | Rand / pound | ~R18.60 | ~R21.78 | Rand firmer by about 0.7% and 0.5% |
| US 10-year Treasury | 5.29% | Up 1.11 percentage points since the start of the year |
| Brent crude oil | ~$103 / barrel | Up roughly 14% |
| Gold | ~$4,170 / oz | Down roughly 6% |
| Platinum | ~$1,710 / oz | Down roughly 4% |
Sources: Morningstar (as published in OIG Insights, October 2026), data as at 30 September 2026. SARB. Stats SA (P0141, August 2026). Index returns are price or total returns as reported by the source. Past performance is not indicative of future performance.
The global story
The rate cycle has turned
For most of the past two years, central banks were cutting rates. September marked the point where more of them started raising rates again. Investec Economics describes these as largely “insurance” hikes: precautionary moves to stop the energy shock from spreading into wages and becoming entrenched inflation, rather than the start of a long tightening cycle.
| Central bank | September decision | Policy rate | Worth knowing |
|---|---|---|---|
| US Federal Reserve | Up 0.25 points | 3.75%–4.00% | First increase since 2023, unanimous vote |
| European Central Bank | Up 0.25 points | 2.50% (deposit) | Second increase this year |
| Bank of Japan | Up 0.25 points | 1.25% | Highest level since 1995 |
| SA Reserve Bank | Up 0.25 points | 7.25% (repo) | Despite GDP shrinking in Q2 |
| Bank of England | Held | 3.75% | Three of nine members voted to raise |
A divided US market
The US economy is running hot: 162,000 jobs were added in August and the Atlanta Fed’s GDPNow model estimated third-quarter growth at an annualised 5%. Yet consumer confidence fell to its lowest level since 2014, and the share market split in two. The technology-heavy NASDAQ 100 rose 3.3% on continued demand for semiconductor and AI-linked shares, while the broader S&P 500 slipped 0.4% and the Dow Jones fell 4.1%. Smaller companies fell more than 5%. A narrow group of large technology companies is carrying the US index.
Europe, the UK and Asia
Europe’s economy has held up better than expected, with business activity at its strongest since April 2023, but energy costs keep inflation above target. The UK faces a difficult Budget on 28 October with little room to manoeuvre as borrowing costs rise. Japan was one of the few markets to rise (+1.1%), helped by chip shares and a weaker yen. China was the weak spot: its main share index fell 5.6% to a 13-month low as weak consumer spending, high oil prices and new US restrictions on Chinese AI components weighed on sentiment, although Beijing announced targeted rate cuts late in the month.
What the forecasters expect
Forecasts are opinions, not facts, and they hinge on oil. With that caveat, Investec Economics, writing on 29 September, expected one more US rate increase in December, two Bank of England increases (November and February) and one more ECB increase, followed by cuts during the second half of 2027 if an accord over Iran brings energy prices down. Its global growth forecast is 3.2% for 2026 and 3.0% for 2027 – slower, but a story of resilience rather than recession.
Closer to home
The economy: soft growth, rising prices
South Africa’s economy shrank by 0.2% in the second quarter, the first decline after six quarters of growth, as trade, manufacturing and mining contracted. Even so, the SARB’s Monetary Policy Committee voted unanimously on 23 September to raise the repo rate to 7.25%, describing the oil price rise as a large and persistent supply shock. It now expects inflation above 5% late in 2026 and cut its 2026 growth forecast to 1.2%. Petrol prices were set to rise again, with the SARB pointing to an under-recovery of R2.83 a litre. This is the classic central-bank dilemma: protecting the value of the rand in your pocket at the cost of slower growth.
Why raise rates with inflation at 4.2%?
Rate changes take a year or more to work through the economy, so the SARB sets rates for where inflation is heading, not where it was last month. Four things drove the decision:
- A new, stricter target. In November 2025, government lowered the inflation target to 3%, with a tolerance band of one percentage point either side. At 4.2%, August inflation was already above the top of that band.
- A worsening forecast. Higher fuel prices led the SARB to raise its near-term forecasts. It now expects inflation above 5% later this year and early next year, peaking at about 5.7% in November, before falling back to around 3% by the end of 2027.
- Expectations are not yet anchored. Surveys still put longer-run inflation expectations around 4% rather than 3%, and the latest survey was taken before the recent fuel increases. Many services prices are also rising well above 3%. If businesses and workers come to treat 4–5% as normal, a temporary oil shock becomes permanent inflation.
- A shock rates cannot fix directly. Government-set and regulated prices rose 10.6% over the year, with fuel alone contributing 5.7 percentage points. The SARB’s stated approach is to look through the first effects of a price shock while making sure they do not spread, but large and sustained shocks like this one are more likely to spill over into wages and other prices.
The decision was unanimous. The cost is real: higher repayments, with prime now at 10.75%, in an economy the SARB expects to grow only 1.2% this year (down from its earlier 1.4%). The SARB’s own model sees rates broadly stable for the rest of 2026, with cuts later as inflation returns to 3%.
Sources: National Treasury, 2026 Budget Review. Stats SA, P0141 August 2026. SARB, Statement of the Monetary Policy Committee, 23 September 2026.
Who feels inflation?
The headline figure is an average, and it hides very different experiences. Stats SA also measures inflation for each tenth of households, ranked by how much they spend:
| Household group | Inflation, August 2026 | Main reason |
|---|---|---|
| Lowest-spending 10% of households | 2.7% | Spend more on food, where prices rose only 0.9% (cereals down 2.2%) |
| Average (headline CPI) | 4.2% | All households combined |
| Pensioner households | 4.3% | Stats SA’s separate pensioner index |
| Highest-spending 10% of households | 4.6% | Spend more on fuel (+20.1%), insurance (+5.9%) and medical cover |
For many households, the true increase in their cost of living is higher than the headline number. That matters most for anyone living on a fixed or drawn income. Source: Stats SA, P0141 August 2026.
Markets: the resource trade reversed
The forces that lifted the JSE in August went into reverse in September. Gold and platinum miners led the fall, financials lost 3.5% and industrials 5.4%. Only the smaller and more defensive corners held up: small caps rose 1.7% and listed property 0.5%. South Africa lagged other emerging markets, which fell only 0.6% overall as Korean and Taiwanese chipmakers held them up. Local bond yields rose with oil, the SARB’s increase and US yields, which is why cash outperformed bonds for the month. South Africa was hit from two sides: higher oil prices raised what the country pays for imports, while lower metal prices cut what it earns from exports. Different data providers calculate index returns slightly differently, for example in whether dividends are included: Bloomberg measured the All Share’s fall at 6.7%, with precious-metal miners down more than 17%, wiping over R1.6 trillion off the market’s value. Bloomberg also noted that company earnings expectations held up far better than share prices, a sign the selling was driven more by sentiment than by business fundamentals.
Why the JSE is not the SA economy
Many of the largest JSE-listed companies earn much of their revenue offshore, so the index responds more to global growth, commodity prices, China and US interest rates than to local news. September proves the point: the JSE fell mostly because of the gold and platinum prices, not because of anything that happened inside South Africa that month.
Not everything is negative
Beneath the headlines, several local indicators remain encouraging. South African banks’ total assets reached a record R9.21 trillion at the end of the second quarter, up 9.1% year on year. Construction activity rose 5% quarter on quarter in real terms, with 95,000 more construction jobs over the year to June. Agribusiness confidence recovered to 53 in the third quarter, back above the neutral level of 50. And producer price inflation – an early signal for consumer prices – eased from 7.8% in May to 5% in August. South Africa also enters the expected El Niño season with a record maize crop in storage and food inflation of only 0.9%, with cereal prices 2.2% lower than a year ago.
Theme of the month: are high interest rates here to stay?
Two respected research houses looked at the same bond markets in September and seemed to reach opposite conclusions. Momentum Investments says yield curves are steepening, while Investec Economics says they have flattened. Both are right – they are simply looking through different lenses. Understanding why is a good lesson in reading market commentary.
Lens 1 – The long view: investors want to be paid for risk
Momentum compares today with the past fifteen years. Government borrowing costs are at their highest since the Global Financial Crisis, far above the 2010–2019 averages when central banks were buying bonds aggressively. Momentum breaks a long-term yield into three parts: what investors expect short-term rates to be, what they expect inflation to be, and a “term premium” – the extra return they demand for tying up money for many years. It is the term premium that has jumped, driven by heavy government borrowing, less central-bank buying, and political and fiscal uncertainty. The SARB adds a newer driver: heavy borrowing to fund artificial intelligence infrastructure. Measured against the inverted curves of 2022–2023, when short-term rates were above long-term rates, curves are now clearly steeper.
Lens 2 – This year: the short end moved first
Investec looks only at the change since January 2026, and finds that short-term yields rose more than long-term yields in the UK, France and the US. The official US data shows the pattern clearly: the 2-year yield rose 1.41 percentage points this year, the 10-year 1.11 and the 30-year 0.80. Markets were busy pricing in new rate increases, which affect short-term bonds most directly, while central bank bond buybacks and the Bank of England’s new approach to selling its bonds supported the long end. The gap between 30-year and 2-year yields narrowed from 1.37 to 0.76 percentage points, so on this measure the curve has flattened. Market professionals call this a “bear flattening”: all yields rising, short-term yields fastest. Investec expects the US 10-year yield to end 2026 near 5.00% and to ease to 4.50% by the end of 2027 if energy prices fall.
Lens 1: 10-year government bond yields, Momentum Investments, Economies at a glance, September 2026. Lens 2: US Treasury constant-maturity yields on 31 December 2025 and 30 September 2026, Federal Reserve Economic Data (FRED series DGS2, DGS10, DGS30).
Why both are right
A yield curve is a shape, and whether it is “steeper” depends on what you compare it with. Against the last few years, long-term yields are much higher than short-term yields used to allow – that is Momentum’s structural point about risk. Within this year, short-term yields have risen fastest – that is Investec’s point about the rate cycle. Together they tell a single story: rates are rising across the board in the short term, and investors are demanding more to lend for the long term.
What it means for South Africa
Higher global yields reach South Africa through several channels. Investors can earn more abroad, so they demand more to hold South African bonds. The government’s borrowing and refinancing costs rise. Outflows can weaken the rand. And currency and inflation pressure can delay rate relief for households with variable-rate home loans. On the other side, Momentum notes that lower inflation expectations, sounder debt dynamics and growth reforms can act as a domestic cushion and reduce South Africa’s risk premium. For investors, there is a silver lining: new money invested in bonds now locks in higher income than it would have a few years ago. The SARB itself argues that, in a world of excessive debt and elevated inflation, South Africa’s commitment to sustainable debt and permanently lower inflation is becoming a differentiating factor, lowering the country’s risk premium and helping to protect it from the global bond sell-off.
What this means for long-term investors
A month like September can feel alarming on a statement, but it is worth keeping it in proportion. The JSE has been through wars, depressions, currency crises and a pandemic, and every decline in its history has eventually given way to new highs – though some recoveries took years, not months. A few principles help in a month like this one.
Depth and duration are different risks. The size of a fall and the time it takes to recover are separate questions. A sound plan is built to withstand both, so that no one is forced to sell at the worst moment.
Your stage of life matters. Investors who are still contributing buy more units when prices fall. Investors drawing an income, such as retirees, are more exposed when markets fall, because withdrawals lock in lower prices. This is why the two groups often need different portfolio structures.
Diversification did its job. While resources fell nearly 10%, cash, small caps and listed property were positive, and global technology shares rose. A portfolio spread across asset classes and regions felt far less of the shock than any single market.
The rand as a shock absorber
The global returns earlier in this insight are in each market’s own currency. South African investors experience them in rands, and in September the currency changed the picture. When global markets turn nervous, money tends to leave emerging markets and the rand weakens, which lifts the rand value of offshore holdings in exactly the months when local assets struggle. In September this worked for dollar holdings, but not for European ones, because the rand weakened against the dollar while firming against the euro:
| Market | Own currency | Currency move vs rand | Approximate return in rand |
|---|---|---|---|
| World shares (MSCI ACWI, US dollar) | −1.1% | Dollar up ~1.5% | about +0.4% |
| European shares (Euro STOXX 50, euro) | −2.1% | Euro down ~0.7% | about −2.8% |
| Global bonds (US dollar) | −2.2% | Dollar up ~1.5% | about −0.7% |
Approximate calculations by Xpert Wealth from index returns and month-end exchange rates. Actual fund returns depend on fees, timing and whether a fund hedges its currency exposure.
One month is not a trend. The resource shares that fell in September were the same ones that rallied in August. Reacting to a single month’s headline usually means selling after a fall and buying after a rise.
If September’s markets have raised questions about your own portfolio or income, please speak to your financial adviser before making any changes.
Dates to watch
| Date | Event | Why it matters |
|---|---|---|
| 21 October | SA Medium-Term Budget Policy Statement and September CPI | Treasury is due to propose a fiscal anchor, and CPI shows how far the oil shock reached prices |
| 27–28 October | US Federal Reserve meeting | Markets are split on another increase |
| 28 October | UK Budget | Higher borrowing costs limit room for spending |
| 3 November | US midterm elections | Could affect the dollar and US fiscal policy |
| 4 November | SA local government elections | Municipal governance and service delivery in focus |
| 19 November | SARB Monetary Policy Committee | Next decision on the repo rate |
| October – March | SA summer rainfall season | Will show how hard El Niño hits maize and food prices |
Sources
Optimum Investment Group (OIG), Insights October 2026: Monthly Market Review, To the Point (Dr Roelof Botha), and Hot Topic articles by Michelle Parker and Francois Botha, with performance data from Morningstar as at 30 September 2026. Momentum Investments, Economies at a glance, September 2026 (Group Economic Insights). Investec Economics, Global Economic Overview, 29 September 2026. Federal Reserve Economic Data (FRED), US Treasury yields. South African Reserve Bank, Statement of the Monetary Policy Committee, 23 September 2026. Bloomberg, via Moneyweb, 1 October 2026. National Treasury, 2026 Budget Review. Statistics South Africa, Consumer Price Index P0141, August 2026.
Important information
This market insight is general information only and does not constitute financial advice as defined in the Financial Advisory and Intermediary Services Act, 37 of 2002. It does not consider any person’s objectives, financial situation or needs, and no action should be taken on the strength of it without first obtaining appropriate advice. Forecasts and views attributed to third parties are their own and may change without notice. Figures are drawn from the sources above and believed to be reliable, but are not guaranteed and may be revised. Past performance is not necessarily a guide to future performance. Xpert Wealth (Pty) Ltd is an Authorised Financial Services Provider, FSP No 51670.