00:00It feels like another deadline, of course, that has been set by President Trump,
00:04but also this one is extremely critical in terms of the consequences that it could have
00:09on the region from a humanitarian standpoint, civilian standpoint,
00:13and of course on key infrastructure as well.
00:15How are you thinking about the risks around this upcoming deadline, the next 24 hours?
00:23Well, again, we're all watching the clock, and it is a good chance that the president delays.
00:29But at the same time, we are on this escalatory cycle.
00:33So the pricing risks that we're seeing certainly have a long way that they could go up.
00:38As you just suggested, we could very easily in the next 24 hours be in a very different price environment
00:44for both Brent and WTI, and we've seen some strange backwardization happening there.
00:50And the risk, of course, for damage to more infrastructure within the Gulf
00:56as a retaliation from whatever the U.S. and Israel do in Iran, I think is weighing very,
01:02very heavily on the region and as a cost that perhaps has not been factored in very well
01:08in the American political environment and what that does in terms of the second-order effects
01:14and sort of global ramifications, particularly what we're seeing in petrochemicals,
01:18not just in crude.
01:21So, you know, this is the moment where it just is intensely critical,
01:29and we could see a major escalatory kind of cycle begin in the next day or so.
01:36And there's nothing to do but to wait.
01:41Yeah, you know, inevitably that's the conclusion, I guess, for everybody here in the region.
01:47Let me just go back to what you were saying about some of the energy disruption that has occurred,
01:52and not just because of the effect of closure of the Strait of Hormuz,
01:55but because of actual destruction, physical destruction that has occurred at some of these key energy sites.
02:00And I wonder whether, I'm not just talking about oil and gas here, but also oil products as well,
02:08whether there's been a sufficient repricing to account for the amount of disruption that has taken place,
02:14or do you still detect an element of complacency in some of those markets?
02:19Well, I think we don't have perfect information about damage that has actually been done,
02:25whether it's to refineries within the GCC.
02:29We've had some kind of stops and starts.
02:31We've had attacks on many ports across the Gulf,
02:36and not just in refineries and oil and gas, but also to aluminum plants, to data centers,
02:43you know, to any number of important kind of mechanisms within the regional economy.
02:49And so it will take some time to assess that damage,
02:52to understand the kind of second-order effects of it.
02:56And, you know, I think we're very concerned right now of attacks that have happened just recently on Jabail and
03:04Saudi Arabia,
03:05and what that means for some of the major petrochemical and SABIC production there.
03:13Yeah, in recent days we've seen petrochemical facilities being targeted on both sides.
03:18Let me ask you about the knock-on effects to the U.S. consumer.
03:22And, you know, President Trump will say that the U.S. are energy independent,
03:26but at the end of the day, the price of gasoline is still following very strongly,
03:32and it's very highly correlated to the spot price of Brent and WTI.
03:36At what point, do you think, is there any price point for, you know, retail gasoline prices
03:44where there will be so much pressure on the president to wind down this war?
03:48Is it $4? Is it $5, which is where we got to back in 2022?
03:53Well, we've surpassed the $4 mark, so we're climbing there.
03:57And this is this, you know, odd barometer of American political pressure.
04:02But it's hitting, I think, and will continue to hit Americans in very different ways.
04:06So first we see it, of course, in transit fuels,
04:09but we're seeing it and we will continue to see food price increases,
04:13but also into consumer goods, anything with plastic packaging,
04:17anything with large polymer sort of components,
04:21whether that's in fast fashion or toys or, you know, anything that requires packaging,
04:30even, like, wood materials, are going to be inflationary.
04:33So all those things are coming and really, in some ways, already beginning to be felt.
04:40And Americans have another barometer, which I think matters maybe more,
04:45which is the price of borrowing for homes, the mortgage rate.
04:50And the 30-year fixed mortgage rate in the U.S. right now is about 6.5%.
04:53It's not going to be going down.
04:55And so, you know, people who are looking forward six months a year to buy a home
04:59are right now having to reckon with the fact that we are going into certainly an inflationary environment.
05:06And so I think that is what Americans will be thinking about and putting pressure on politicians,
05:12particularly as we get through the midterm elections in the fall.
05:16But, you know, all of these things can change so quickly in the next couple of days or so
05:21and get much worse.
05:24Yeah.
05:25And, of course, Karen, one of the big questions is the fate of the straits, so to speak.
05:29How much upward pressure could we see structurally on energy prices
05:34if we end up in a situation where Iran still has some effective control
05:39of which vessels can pass through the straits?
05:43I mean, I think a system like that where you have Iran putting a toll,
05:47whether it's a dollar per barrel, two million per tanker,
05:50it's just not tenable in any long-term fashion.
05:53It just can't hold.
05:56And so what would essentially happen is that you get some sort of military intervention,
06:01escorts of tankers from the Iran's labeled unfriendly countries.
06:06And that just, you know, prolongs the aspect of a military intervention
06:11and potential for mining and attacks on ships,
06:15which will keep the price higher for longer.
06:18So I don't think that's a long-term solution,
06:21but it does mean that we see higher prices for longer.
06:23I think more likely is that we see a much further price hike
06:27in the event of continued conflict and escalating conflict.
06:32And there's plenty of runway for that to go.
06:36You know, I think you mentioned 140 number,
06:39but we could see even much higher than that.
06:41Certainly, if we see a diminishment of shipments
06:44or any kind of attacks on those diversions of crude
06:48that we've been able to secure because of pipelines
06:51in the Arabian Peninsula right now.
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