South Africa on Tuesday lowered its fuel tax for a month to offset a global oil price surge driven by the Iran war, even as pump prices rose in one of the steepest increases on record.

The general fuel levy would be reduced by three rand ($0.18) per litre, the finance and petroleum ministers said in a joint statement.

Despite the relief, diesel will rise more than 7 rand per litre, a 40% increase, while petrol – still cheaper than diesel – will jump about 15%.

Kerosene, widely used by lower-income households for lighting, heating, and cooking, will surge 93%.

Measure to cost the government $352 million

The measure will cost about six billion rand ($352 million) in foregone revenue but is designed to be fiscally neutral, with losses recouped elsewhere, the government said.

It was not immediately clear how the government would rework its budget, with the Finance Minister Enoch Godongwana telling journalists: "I don't know where I'm going to find this money for now."

A proposal last year to increase value-added tax caused fractures within the coalition government that the African National Congress formed after the May 2024 general election.

"Work is under way on a broader package of measures to support households and key sectors of the economy," the government said.

US-Israeli war on Iran

Oil prices have soared since the US-Israeli war against Iran disrupted tanker shipping through the Strait of Hormuz, sending shockwaves through the global economy and sparking fears of shortages around the world.

Unlike many regional peers, South Africa has avoided widespread fuel queues, though some stations reported running dry as motorists rushed to fill up ahead of the price hikes.

Minibus taxis, the country's main form of public transport, have threatened to hike fares.