00:00And we have so many headlines around the Iran war, right?
00:03At the moment, we're hearing from Prime Minister Takeuchi of Japan saying that she's strongly urging Iran to allow Hormuz
00:10safe passage,
00:12that she's seeking phone conversations with both the presidents of the U.S. and Iran as well.
00:18When it comes to Northeast Asian economies heavily dependent on oil coming from the Middle East, Japan, South Korea, for
00:26example,
00:27what are the market implications of, as you mentioned, if the Iran war gets prolonged, and how do you really
00:34try to hedge that risk?
00:41Well, first of all, you know, our base case right now is that of eventual de-escalation, because we see
00:49political logic in that approach eventually.
00:53If you look at the price of the gallon in North America, it has already spiked past $4 per gallon,
01:01and it's becoming a political issue for the U.S.,
01:04because at the end of the day, despite the fact that U.S. economy is relatively shielded from these shocks,
01:11you know, the market for fuel is still a global one, and the U.S. consumers will have to bear
01:17the brunt of that.
01:18So that's, you know, issues like this will be a key constraint for the White House going forward,
01:23and potentially a motivation to de-escalate.
01:27But, and also we note that actually there is a hint of improvement in Hormuz flows.
01:35If you look at the trackers, you know, for this, you know, vessel crossings through Hormuz,
01:41it's actually rising a bit in the past few days.
01:44So it's entirely possible that the belligerents in the conflict try to compartmentalize the conflict
01:49and maybe keep the flows to a degree.
01:53But, as you have said, East Asia is heavily exposed to imports from the Middle East,
01:59and if you face a situation where you have, you know, effective closure of the Hormuz persisting well beyond April,
02:05then we have a proper crisis in our view,
02:07and that will likely prompt fairly significant adjustment in forecast and also market pricing
02:13and what the dynamic will be for the rest of the year.
02:16So that risk is still there,
02:19and that's the reason why investors, including ourselves,
02:23you know, refraining from taking aggressive risk,
02:26even though there are some hopeful signs,
02:29as well as some discouraging signs, you know, from the region.
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