00:00As we think through what this means for oil in particular, what should we be paying attention to?
00:04I think up in the run-up to all of this, there was a lot of concern over what might
00:07happen to the Strait of Hormuz,
00:08what it would mean if that were to be constricted, if oil couldn't get out.
00:11As you look at that map, the map function on the Bloomberg terminal today,
00:15and see those 200-plus tankers there in the region, kind of wondering,
00:19the heads of those ships wondering as we are, what happens next?
00:21What does this mean for the oil market?
00:25This is still an open question.
00:26So, in the last 12 hours, I think we had four key questions when it comes to Iran,
00:32and I think three of them have been settled, and we'll have a partial answer to the fourth.
00:35The first question was, will the US and Israel attack Iran?
00:39And yes, they have.
00:40The second question was, will the Iranian government survive the attack?
00:45And the answer is, yes, they have survived.
00:47The third question is, will the Iranian retaliation be significant or symbolic,
00:56like previous wars, and actually they went for symbolic?
00:59And the last question is, how will Iran, what will Iran retaliate against?
01:03Will it restrict itself to US bases in Israel,
01:05or will it expand that to all facilities in the region?
01:09And so far, it has attacked US bases in the region, across the region, and Israel,
01:14but you cannot rule out attacks against all facilities or the Strait of Hormuz in the coming hours or days.
01:20I also want to ask you about sanctions.
01:23The Iranian economy has long been suffering under US and international sanctions.
01:28We had the snapback E3 sanctions earlier this year.
01:31What is the state of Iran's economy,
01:33and what is the impact of a prolonged conflict like this going to do on an economy that is already
01:40under dire straits?
01:43Well, there are two things here, I think.
01:45The first thing is, when it comes to the Iran economy,
01:47its state is already dire, and that has led to protests in late December and January this year.
01:52But this war is different.
01:54This war is not about the economy.
01:55This is, for the Iranian leadership, this is existential and it's about survival.
01:59And it's about more military than economic.
02:03If they can survive the next few months,
02:05it's a question of not whether the economy is going to be able to survive this in terms of inflation,
02:09in terms of the currency,
02:10but whether they can survive the military attack and the counterattacks
02:14they're going to launch against the US and Israel and their allies in the region.
02:18That's the key question for Iran,
02:20more than the economy in the coming days and weeks, I think.
02:23Siad, for those who don't know,
02:24how integral is Iran to the global oil market?
02:26We had those headlines this morning from a delegate,
02:28an OPEC Plus delegate,
02:29indicating that maybe production could be increased as a result of what's happened here overnight.
02:33When we look at the market holistically,
02:36how integral, how important is Iran to oil production globally?
02:40Iran is significant, but it's not irreplaceable.
02:44So Iran produces about 5% of the global oil supplies put to the world.
02:50But that's not the key issue.
02:51The key issue is the wider region.
02:53Once you just expand the war beyond Iran,
02:55you need to start thinking about Saudi Arabia and Iraq and Kuwait and UAE and Qatar.
03:00We're talking about one third of global oil supplies.
03:02If you think about one particular waterway, which is the Strait of Hormuz,
03:06that basically 20% of global oil flows goes through that.
03:09And that is very difficult to replace.
03:11Yes, OPEC Plus may decide to increase their, you know, the quotas.
03:17But if these additional quotas are coming from Saudi Arabia and Kuwait and Iraq,
03:21and they cannot exit the Strait of Hormuz to the rest of the world,
03:23they may not be effective in hedging the losses from this war.
03:28We've talked a lot about what the impact of actual physical strikes could be.
03:32But what is the psychological impact on production here?
03:36We've already seen some oil fields shutting down preemptively.
03:39Could that have just as big of an impact as producers don't want to send their ships to that Strait
03:44at the moment?
03:44They're shutting down, pulling their personnel out of harm's way.
03:47How big of an impact could that have?
03:51I think the physical sort of threats are more important than psychological threat.
03:56Let's remember, this is not the first war in the Middle East in the last two and a half years.
04:00This is a good point.
04:01This is a good point.
04:03The Middle East has been in an almost continuous state of war with unprecedented geopolitical escalation.
04:09Things that we did not imagine could have happened have already happened.
04:12And yet all prices today, you know, on Friday, they closed at $71 per barrel.
04:17On the 6th of October, 2023, they were $85 per barrel.
04:21So they're lower than the starting point.
04:23So I think on the psychology, I think markets are sort of getting used to the geopolitical escalation in the
04:28Middle East.
04:29The key question here is whether we're going to get physical disruption.
04:32And this is another test.
04:33It's probably the most serious test in the last two and a half years.
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