00:00We should spend some time focusing on the importance of this channel, this conduit for the transit of oil and
00:05gas in the Middle East to all parts of the world.
00:09Explain the importance of it, the gravity of the situation we see from Marisk and others is really a standstill
00:15when it comes to the transit of these shipments.
00:18Well, I think it's prudent and important to stay away from a war zone once it initially starts.
00:23But the potential for Iran to really discombobulate traffic in the Strait of Hormuz I think is quite low, particularly
00:31because I doubt the U.S. military, who have wargained this event for almost four decades, would not have that
00:38very well covered.
00:40Again, the U.S. has a history in 1988 of wiping out the Iranian army in just a few hours.
00:45So I think it's prudent to stay away now as it starts.
00:47But my sense is these things typically start really fast.
00:50I think by the time we see the market soak in Monday morning, we're probably going to see the word
00:55maybe more defenseless next to this country of Iran.
00:59We're seeing peripheral attacks coming out.
01:01But I'm pretty sure that this is pretty well covered.
01:04And this is just an early stage.
01:05Something has to go terribly wrong.
01:07I think markets already had a pretty good premium pricing for this, particularly in crude oil and gold.
01:11And I think risks are we might see a little bit more relief and head lower as we head into
01:17New York's Monday opening.
01:18Mike, we talked about this a little bit yesterday, but I want to get your take.
01:22What is the bigger impact, the actual physical blockades, the routes being stopped, the bombs and rockets dropping on possible
01:29oil installations, or the psychological impact on the markets?
01:34Yet another conflict breaking out and these companies having to pivot or at least protect their assets in a way
01:39that seems smart and responsible given global events.
01:44Well, I think the psychology is the important part.
01:47So the market has bid up for a pretty significant premium in price for Brent, maybe around $10 a barrel,
01:53up to $72 a barrel on the year.
01:55So it's already priced for that premium, but potential supply disruption.
01:59So we might have some issues in the strait, maybe some tankers, but is there going to be a definable
02:05disruption in supply from that part of the world?
02:07Iran exports up to 2 million barrels to the day, but then in context, the U.S. is approaching 4
02:13million barrels a day in crude oil and net liquid exports.
02:16So I think that's the key thing.
02:18I think it's unlikely.
02:19We did see an example of Saudi facilities getting hit in 2019, and I think it was September, and that
02:25lasted for a little while.
02:26You got a little bounce, you went back.
02:28The difference this year is this year.
02:30Now, that was really more of a different market.
02:31We're in a severe bear market.
02:33We've already bounced in price.
02:35So I got to see some supply disruptions.
02:37Otherwise, I think risks are – another key thing I want to mention is managed money.
02:41Our hedge funds came into this weekend a little bit long, so they might be at risk of hitting some
02:45stops.
02:46Mike, we've got about a minute left, and you've talked about a discombobulation, the way that the markets have to
02:51digest all of this.
02:52In that minute we have left, walk us through how you're going to approach the open tomorrow, the Monday open.
02:57Yeah, I think we're going to – we've already had good indications of relief in Bitcoin.
03:01It went down and right back up.
03:02We've seen the gold market trade with tokens up maybe the $5,400 an ounce.
03:08The way I look at it is unless there's some kind of major setback for U.S. and Israel, which
03:14I doubt, we should expect the premium in crude oil to be lower, maybe even natural gas to reduce some
03:20of that premium, and maybe even in gold to go lower.
03:26But I think you're going to see a bit of a relief globally that the head of this country that's
03:31been a bit of an antagonist on a global sale has been removed.
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