00:00Yesterday, prices did move higher after the announcement of the blockade by the United States on Iranian-linked cargos exiting
00:07the Persian Gulf.
00:08However, I think the price action shows that traders think that we haven't seen the end of the negotiations and
00:14we're likely to see more talks sooner rather than later,
00:18and that in some senses the blockade is a bit of a gambit just to move the negotiations forward by
00:24the U.S.
00:25and there are questions about how much will and means the United States has to actually enforce this blockade
00:31and whether it has the political will, for example, to actually intercept ships that are owned by China,
00:38which would, of course, be a geopolitically challenging thing to do.
00:42So for all those reasons, I think the oil market is not pricing in a full blockade for a long
00:49period of time.
00:51What, in practical terms, obviously the flow of oil through the Strait of Hormuz has been drastically reduced by the
00:57war as well.
00:58What additional effect, or if any, is this blockade having, do we know, as to what can be transported through
01:04that strait?
01:05It's a bit too soon to say, I think, Stephen.
01:09If we take the U.S. at its word, what it's trying to do is block Iranian exports,
01:15which, as we know, have flowed freely through the strait, through the entire conflict,
01:20providing a key pressure valve to global markets.
01:23Particularly, a lot of that oil is going to China, so it's insulated China for the full impact on energy
01:30from the war on Iran.
01:32If that were to stop, it would tighten energy markets globally further.
01:37It would put more pressure on prices, and we would probably see them ratchet higher.
01:41So as I said a moment ago, it does seem rightly or wrongly that the market is discounting how severe
01:49this blockade will be.
01:50And yet the damage to the global economy could be significant, maybe,
01:56if you look certainly at the latest IEA report, that the war in Iran has wiped out global growth in
02:04demand for oil for this year.
02:06That's the key line from them.
02:08But that surely points to the hit to economic growth, then.
02:12No, that's right.
02:12And we shouldn't make light of what's been going on in energy markets.
02:16It is the biggest shock we've probably seen to global energy markets since the invasion of Ukraine almost more than
02:24four years ago.
02:26The IEA laid it out quite clearly in its monthly report today that we're missing 10 million barrels a day.
02:32And frankly, if that continues for any length of the time and we draw down all the reserves that are
02:37out there in the world,
02:38we're going to have to close that gap by destroying demand.
02:42And ultimately, that means fewer people flying, fewer people driving, fewer people going about some of the economic activity they
02:51normally go about.
02:52And so, as you say, Caroline, it will eventually hit economic growth.
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