00:00How have you been updating your forecast, various scenarios because of the experience of the U.S. Iran war has
00:06taught us anything. It's volatile.
00:10No, absolutely. It has certainly been a very busy morning. I think the way that we're trying to approach this
00:17is that this two week ceasefire is probably part of something which is a broader, comprehensive, substantive agreement.
00:26And the question is now in the next two weeks, what kind of details will we see?
00:31Like we have already had 15 point plans and 10 point plans showed to us.
00:36And there look to be certain divisions already between what are the interests of Israel, the U.S. and Iran.
00:43And so now the question is the whole detail of this plan is now undisputed.
00:49And I think as we get more clarity, as we kind of see what can they agree on, I think
00:54markets will shift lower.
00:56With that confidence. But it is going to be very tricky because I think the reason that Iran is even
01:02in a position to negotiate right now is they would be looking for some significant concessions given the leverage they
01:08currently have.
01:09And I think there is going to be some serious discussion about how viable that is, not just for for
01:14Israel in the region, but the Gulf partners, which I think is going to be really critical to unpack the
01:19next week.
01:21So as it stands, we've got the Strait of Hormuz open for two weeks.
01:26Everybody is hoping that it is longer for that than that.
01:28But considering 135 ships per day would transit the Strait under normal circumstances, how long could we expect it to
01:37be before we see traffic get back to normal levels?
01:40How much of a backlog is there?
01:43I think the promising part is there's a lot in inventory, so I think the physical side will probably take
01:49like a week to to almost think about normalizing port loading.
01:54But then the question will be, how will the shot in operations come back to normal?
01:59And that is something that ranges depending on the asset.
02:02You know, we could be talking, you know, I think Kuwait put it out there that it took three to
02:07four months for for their oil field.
02:10And the question here is what kind of damage is done?
02:13And I think we're going to get more clarity on that as well.
02:15So on the one side, you know, I think there's going to be a geopolitical premium that will ease as
02:20we get more details and some idea that a deal can be reached.
02:23But on the other side, the landing spot will depend on what kind of sustained damage we've seen.
02:28So I think on on oil, I think that has seen upstream oil at least has seen the least damage
02:34amongst the different energy vectors.
02:36But where premiums can probably be more entrenched, you know, when we look at it over the next kind of
02:40two months, it's probably going to be in the middle distillates and as well as LNG.
02:47Because the damage we've seen across refineries and gas and LNG assets in the Persian Gulf has been significant.
02:55So that's how we're trying to look at it right now.
02:57But, yeah, it's a very early reaction to something that's just happened.
03:03Markets are notoriously sort of short-lived in their memories, right, of disruptions like this.
03:09But do you think this gives way to a broader conversation about energy security, some of these bypasses that we've
03:16seen and alternative sources?
03:20Oh, look, I think absolutely.
03:22I think if the 70s was any lesson in terms of how markets diversify, like Europe was a good example,
03:29going down nuclear and even looking at Russian gas as options post what we saw with disruptions in the 70s
03:36in oil markets.
03:37I think you will have very similar conversations around the world right now about how do we bypass these issues,
03:45these choke points in global markets.
03:47And I think the pipeline build out and trying to reduce your risk, I think certainly that will gain traction.
03:54I think the east-west pipeline and its surge capacity, hitting its capacity of 7 million barrels a day, has
04:00really been a success story for Saudi.
04:02But I can see a number of Gulf countries looking for those bypass routes.
04:06And I think Qatar particularly will be looking at something like that, given just how bound they were with the
04:12strait of Hormuz.
04:14Gold has been an interesting one.
04:16We're clearly seeing the relief rally include gold and precious metals today, but we're still down, what, about 10 percent
04:23from the start of the war.
04:24That's a pretty meaningful discount.
04:26Do you think there are structural issues at play there or does it depend on how much this situation improves
04:32and whether it can sort of have implications for the central banks as well?
04:38Yeah, look, I think the key part to consider here is, you know, the U.S. dollar weakness and what
04:45we've seen initially.
04:46We've seen that big, sharp rebound, you know, in the last couple of hours.
04:51But when we look at it in terms of what will shape it, is how does near-term inflation expectations
04:57change?
04:58And if we start seeing that reduce and therefore the idea of lower rates, I think that will then be
05:07another bullish tailwind for gold.
05:09So I think it has more upside to go, but I think markets are still reacting and digesting.
05:14But, you know, we are still going to go through a physical issue with oil and LNG.
05:21And I think the market has to absorb that first.
05:23So I think there's a bit of a lag before gold gets that tailwind.
05:26But certainly that's probably the thing to look out for.
05:29But certainly I think gold has all the ingredients to keep rising and well above where we are now.
05:36You know, we had concerns about our $6,000 an ounce target by the end of this year.
05:41However, if everything plays out and we see this lead into a broader comprehensive agreement, we think that has more
05:47reality just off the bat.
05:53Vivek, one statistic we've heard often during this conflict is that 20% of the world's oil goes through the
06:00Strait of Four Moos.
06:00Obviously, that means 80% doesn't.
06:03Considering the rather bruising experience that the world has just been through, do you anticipate a meaningful reordering of energy
06:11supply chains?
06:12Or do you think the memory of this conflict will start to fade fairly quickly?
06:18Look, it's a great question because on top of secure supply chains, there's also a view of the transition and
06:26how quickly can we go there and get, you know, almost independence from fossil fuels.
06:29I think there will be a more practical view of it that this transition needs us to consider the supply
06:36chains more seriously.
06:37And I think there will be protections given to even aging assets, but needed assets in case we see something
06:44like this again.
06:45But it will definitely push that rollout into low carbon alternatives.
06:51And EV is one option for me that I think is like all the upgrades are coming through in terms
06:57of EV sales.
06:58And I think that's certainly going to be part of the picture and part of the mandate of governments to
07:02kind of reduce their reliance on these fossil fuel supply chains.
07:06But I think protection of what is existing is certainly going to be there.
07:10And that will mean protecting assets that may potentially be loss-making in this transition.
07:15But I think there will be certainly a push to have that security just so we avoid these risks that
07:23we just saw with the Strait of Four Moos.
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