Consumer confidence in South Africa saw a rebound in the third quarter, though the combination of elevated oil prices driven by the Iran conflict and high interest rates is expected to keep household financial strain and sentiment subdued.

First National Bank, a division of FirstRand, along with the Bureau for Economic Research, said in an emailed statement on Thursday that the quarterly consumer confidence index improved to -13 in the three months ending in September, up from -19 in the previous quarter.

The survey coincided with an escalation of tensions in the Middle East, which has recently pushed Brent crude prices from around $90 per barrel to above $100. The Johannesburg-based bank noted that higher oil costs are lifting local petrol and diesel prices, forecasting an additional increase of 2 rand ($0.12) per liter in October, which could squeeze disposable incomes.

"Rising bus and taxi fares are adding to the transport burden for lower-income households, but low food inflation is providing some relief to their budgets," said Mamello Matikinca-Ngwenya, chief economist at First National Bank. She cautioned that the South African Reserve Bank's 25 basis point rate hike in May to 7% has a more pronounced impact on middle and higher-income groups, who carry larger formal credit burdens and spend more on durable goods.

The bank reported that confidence among higher-income households, which are the primary drivers of domestic consumption, remains weak. The resumption and deterioration of the Middle East conflict is seen as a negative signal for consumer sentiment.

"The recent sharp rise in oil prices indicates a worsening near-term outlook for fuel costs, which in turn darkens expectations for overall inflation and interest rates," the bank said.

Matikinca-Ngwenya added, "Heading into the festive season, consumers are likely to remain cautious, prioritizing essential purchases over discretionary ones. This suggests that consumption growth will stay tepid, with value-focused retailers performing better than premium brands."

The South African Reserve Bank is scheduled to announce its next policy interest rate decision on September 23.