00:00It feels like many continue to kind of somewhat brush off higher energy prices.
00:05Markets not necessarily, though, today, thinking this war may be a short thing.
00:09How are you and the Bloomberg economics team kind of thinking about the impact,
00:13and what is the impact already?
00:15Yeah, exactly on that point.
00:17We did a scenario exercise actually months ago, well before this conflict,
00:21looking at what could happen in the Middle East and gaming out worst-case scenarios,
00:25which are what's playing out right now in terms of a direct U.S.-Israel-Iran conflict.
00:30And in our estimation, if there are going to be sustained persistent disruptions to energy facilities in the region,
00:38the Strait of Hormuz, that could actually lead oil prices to top $100.
00:41We estimate reaching up to $108 a barrel.
00:45That's not where markets are today, and we think that's probably because they think that these will be short-term
00:49disruptions.
00:50But as you mentioned, the conflict doesn't look like it's anywhere close to ending.
00:54And in fact, Iran is promising a new wave of retaliation, just as President Trump is promising a new big
01:00wave of attacks.
01:01So I think we're likely to see fighting continue for at least the next few days.
01:05The question is, how long can Iran in particular sustain its attacks while its leadership is also under siege?
01:13Jennifer, while you're doing that scenario analysis, how are you defining short-term versus long-term,
01:18and what would it take in terms of a conflict such as this to get oil prices up to that
01:23$112 a barrel?
01:25I think it will be key to figure out for oil markets how long they think these disruptions are going
01:31to last.
01:31The Strait of Hormuz is effectively paralyzed right now.
01:34We don't see traffic really moving through it.
01:36The United States is trying to reopen it by promising naval escorts, insurance for ships.
01:41We haven't yet seen if there's going to be much uptake on it or how the U.S. is actually
01:45going to follow through on those policies.
01:46And the risk is that even if you take out a lot of Iran's missile launchers, as the United States
01:51and Israel have to date,
01:52they still have a lot of other weapons that they can use to disrupt traffic.
01:55All it takes is the odd drone attack to make tankers question the risk assessment of whether or not it's
02:01worth trying to travel through the Strait.
02:03I think what we're watching to see is when do oil markets start to grapple with that reality and do
02:08we start to see them price it in more?
02:10At the moment, they seem to be betting that all of this is just going to be a few more
02:14days of disruption and we're going to be back to normal very soon.
02:17Hey, there are sometimes reports about off-ramps.
02:21And there was something this morning.
02:24This is from CN Wire, Iran's deputy foreign minister.
02:27Iran, ready to abandon nuclear program if the U.S. offers a satisfactory alternative.
02:32What are you guys hearing at all?
02:34Because this is what helps you figure out what the U.S. or global economic impact is.
02:39What are you hearing at all about the possibility for some kind of conclusion or off-ramp that Iran might
02:44be actually offering up to the United States?
02:47I think an important point of context is that there are multiple actors within Iran.
02:51Not all of them speak with the same voice, right?
02:53We heard similarly de-escalatory remarks from the foreign ministry earlier this week where they said we're not going to
02:59close the Strait of Hormuz
03:00at the same time that the IRGC was telling tankers to stay away.
03:04So I think it's important to pay attention to who are going to be the more authoritative voices in the
03:09system.
03:09Those are probably the ones that, for example, are more hardline, are more conservative, are less willing to work with
03:15the U.S.
03:15and are thinking we are suffering pain, but we're going to make U.S. partners in the region and the
03:20global economy suffer more,
03:21and that's going to lead them to fold first.
03:23So at the moment we see the more authoritative actors in Tehran just kind of digging in their heels
03:29and preparing to fight for a longer period of time.
03:32Yeah, let's go to some of these headlines now.
03:34Iran hasn't asked for a ceasefire, the minister tells NBC.
03:37Iran edges toward choosing a new leader.
03:39The president, though, President Trump, says he should be involved.
03:42We mentioned the rise in oil prices, the stocks that are weighed down by the ramifications of that war,
03:47and Israel continues to target Iran's IRGC sites.
03:54So, Jenny, on Carol's question about a potential off-ramp, we also consider the power vacuum in the country.
04:01And curious about your view on this, because the president seems to go back to what happened in Venezuela
04:07just a little over a month ago and talk about the success there,
04:10and Delcey Rodriguez is acting as president there right now.
04:12There is no Delcey Rodriguez of Iran.
04:15There is no person that the U.S. had lined up to take the role of the Ayatollah, or at
04:22least rule the country.
04:23What's a plausible scenario for what that looks like?
04:27Yes, the contrast between Venezuela and Iran are limitless.
04:29And I think what's important to point out is, first, yes, the Islamic Republic has suffered some major losses
04:35of leaders and senior officials, but the system remains in place, and it's widespread, and it is entrenched.
04:41There are people who are in the process of choosing a new supreme leader,
04:44and if for whatever reason that gets disrupted, there will be other candidates that they will choose from.
04:50The IRGC itself is 200,000 people spread across the country.
04:54So, yes, Israel and U.S. strikes have taken out quite a few of the senior leaders,
04:58but there are still many of them remaining.
05:00So I think what all of that suggests is we're not likely to see what President Trump hoped for
05:06on Saturday morning when he announced these strikes of the Iranian people rising up
05:10and taking, I think as he referred to it, their future into their own hands.
05:14What we're likely to see is either a persistence of this system or a new but probably still authoritarian system
05:20take its place.
05:21And so I don't think we're likely to see a Venezuela model where you have a government
05:26that maybe could move towards democracy on a somewhat orderly timeline.
05:30I think the best case is we either get a ceasefire with the current system
05:34or we see a very chaotic and a very unpredictable world emerge
05:38where there is some sort of internal fighting or a complete collapse of the system and power vacuum.
05:44And safe to say, Jenny, any boots on the ground in order for actually even to push for more change?
05:48I mean, you guys in this story, say authorities are tightening control of the streets.
05:52No organized opposition operates inside the country.
05:55So kind of business as usual to some extent.
05:58Yeah, I think from the perspective of the United States,
06:00President Trump has been really clear to not put constraints on whether he would put boots on the ground.
06:05But that would be a really risky endeavor, put a lot of U.S. lives at risk and be very
06:09costly.
06:09So I think it's probably something he doesn't want to do.
06:12Now, there are other options.
06:13The U.S. has used proxies in the past, and that might be something that's under consideration.
06:18But the history of regime change efforts has shown you can't really change a regime just through air power alone.
06:24You have to have boots on the ground.
06:25You have to take a side to colquies and Missouri.
06:25The program has used proxies in the past.
06:26You must already see that analogy and couldn't do anything and don't get myself under control of each other.
06:26But even I think so.
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