Our Thinking

For much of the post-Cold War period, investors benefited from a relatively stable geopolitical environment, falling interest rates, expanding global trade, and the deepening integration of capital markets. These conditions created a powerful tailwind for financial assets and allowed investors to focus primarily on economic and corporate fundamentals.

Over the past 4 decades it has firmly established itself as a viable clean energy alternative through significant advancements in technology and scale. Yet, short-term changes in political will and the regulatory environment can bring significant market turbulence, distracting from the overarching fact that the world still needs vastly more clean, secure, and affordable power.

The current geopolitical backdrop, particularly the escalation of war in the Middle East, has reinforced a shift that has been building beneath the surface of markets for some time. Volatility is no longer cyclical, it is structural.

At the centre of this shift more recently lies the oil market. The Strait of Hormuz has become the focal point of disruption due to the fact that roughly 20 million barrels per day, close to a fifth of global supply, typically flows through this channel. Even partial impairment to these flows introduces a meaningful supply shock and with it, a repricing of inflation expectations globally.

The 2026 Budget delivered by South Africa’s Finance Minister, Enoch Godongwana, was what markets were hoping for – credibility, discipline, and a clear anchor for South African bond risk premia.

South Africa’s banks are gearing up for significant issuances – a shift that could reshape listed credit markets and redefine future bank funding curves. We unpack the structure, risks, and market implications of First Loss After Capital (FLAC) instruments – and what it all means for investors.