The South African rand began the week at its lowest level in four months as escalating hostilities in the Middle East kept oil prices high, stoking inflation worries ahead of a much-anticipated interest rate decision.

At 0651 GMT the rand traded at 17.2275 against the dollar,down 1.3% from its previous close, at its weakest level since late November 2025.

On Saturday, US President Donald Trump threatened to"obliterate" Iran's power plants if it did not fully reopen the Strait of Hormuz within 48 hours, barely a day after he talked about "winding down" the war, now in its fourth week.

Meanwhile, Iran said on Sunday it would strike the energy and water systems of its Gulf neighbours in retaliation if Trump follows through with his threat. Analysts expect continued pressure on the rand after a torrid three weeks, amid concerns that rising oil prices will lift inflation in net energy-importer South Africa.

Domestically focused investor attention will be pinned on the central bank's rate decision on Thursday. Economists polled by Reuters expect the bank to keep its main lending rate steady at 6.75%.

The South African Reserve Bank's governor told Reuters earlier this month that the bank will revise its risk scenarios for its next policy meeting as the Middle East conflict continues to push oil prices higher.

Other economic indicators due this week include the composite leading business cycle indicator on Tuesday, and producer inflation data on Thursday.

Key South African exports gold and platinum fell 5% and 9%respectively, further straining local assets. South Africa's benchmark 2035 government bond was flat in early deals, with the yield at 9.2%.