The rand crumbled in overnight trade as the world continues to be gripped by panic over the Covid-19 virus – while oil prices collapsed after Saudi Arabia launched a price war against Russia.

In early morning trade, the rand was significantly weaker, breaking past R16 to the dollar and almost hitting R17/$ before pulling back.

By 06h45, it was trading at R16.20 to the dollar, R21.18 to the pound and R18.48 to the euro – the weakest point since early 2016.

“It’s a dark Monday for the rand as we kick off this week. Markets are clearly in panic on the back of not only the Covid-19 virus, but an oil price war that has just flared up between Russia and Saudi Arabia, while India has confirmed a bird-flu outbreak in Kerala,” said Bianca Botes, Treasury Partner at Peregrine Treasury Solutions.

“In this environment, data will have little effect on currency markets as moves as big as 10% were witnessed in the overnight session.”

She warned over further volatility in the currency throughout the day, as more markets open up.

One of the key drivers of the collapse is the Russia/Saudi Arabia oil price war, which has seen the latter slash prices after Russia refused to cut its output.

Oil prices, which were already trading much lower at around $50 a barrel at the start of the month, have tanked to around $30 a barrel, sending related stocks crashing.

“Today’s price action puts at risk the fiscal health of the vast majority of sovereign producers and budget cuts and increased debt loads are now looming in the event of a prolonged period of low prices,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.

“For the most politically and economically fragile producer states, the reckoning could be severe.”

The impact has been felt across global markets:

For the first time, the 10-year US Treasury yield fell below 0.5% and the 30-year yield dropped under 1%;

Crude plummeted more than 30%, sliding the most since the Gulf War in 1991;

Norway’s krone slid to its weakest against the dollar since the 1980s. Mexico’s peso as much as 8%, to the weakest since the aftermath of border-wall advocate President Donald Trump taking office;

Australian and New Zealand 10-year government bond yields hit fresh record lows;

The yen, seen as a safe haven, climbed to its strongest since 2016.

While a massive drop in the oil price would likely push fuel prices much lower (as seen in South Africa for March), the effects ripple through the markets in other ways.

According to Bloomberg’s economic analysis, the oil-price crash, if sustained, would upend politics around the world, exacerbate strains in US high-yield credit and add pressure on central bankers trying to avert a recession.

“It would otherwise prove a boon to consumers, but the coronavirus is increasingly keeping them at home. Italy over the weekend effectively put its industrial heartland in the north of the country on lockdown,” it said.

“You just don’t know which way things are going to go, it makes it very hard to price anything right now,” said Sarah Hunter, chief economist for BIS Oxford Economics, on Bloomberg TV. “We’re seeing that in the market with the wild oscillations that are coming through.”

Read: Rand slides after first confirmed coronavirus case in South Africa