While it's consistently been one of the world's most impressive emerging markets, South Africa is feeling the fiscal pressure of the Iran crisis, and its countermeasure efforts may not be enough to withstand the heat.

The South African Reserve Bank held its policy interest rate at 6.75%, opting against cuts as global energy prices are expected to push domestic inflation higher. Fuel inflation is projected above 18% in Q2, with headline inflation approaching 4%.

Maintaining rates amid rising energy costs pressures the rand, equities, and corporate borrowing. Investors now anticipate a longer tight money period in South Africa, affecting domestic and regional capital flows and market confidence.

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